Gary W. Marsh, Esq., at McKenna Long & Aldridge LLP, in Atlanta, Georgia, tells the Court that under a May 2005 Deed to Secure Debt and Security Agreement, Legg Mason is the designated loss payee on the Debtor's property insurance policies. The insurance proceeds is not cash collateral, Mr. Marsh contends.

Because under the terms of the loan document, the insurance proceeds are required to be paid to Legg Mason, and because the Debtor has no right to use any portion of those proceeds, Legg Mason argues that it owns those proceeds, rather than just being a security interest holder on the property.

According to Mr. Marsh, even if the insurance proceeds were found to be cash collateral, there is no authority under the Bankruptcy Code for the Debtor to pay Disaster Services, an unsecured creditor, on a prepetition claim, absent a plan of reorganization.

Legg Mason also disputes the assertion that it has a sizeable equity cushion. Legg Mason wouldn't be adequately protected if those proceeds will be used, Mr. Marsh argues.

360 GLOBAL: Balance Sheet Upside-Down by $56 Million at June 30---------------------------------------------------------------360 Global Wine Company filed its financial statements for the second quarter ended June 30, 2006, on Form 10-Q, with the Securities and Exchange Commission on Aug. 23, 2006.

Revenues for the second quarter ended June 30, 2006 increased by approximately $4.2 million, to $4.3 million as compared to $84,335 for the fiscal quarter ended June 30, 2005.

The Company disclosed that in the second quarter of 2006, all of the revenue resulted from its 2005 acquisition of Viansa Winery and that during the three-month period in 2005, it had brokerage fee revenue that did not recur in the 2006 second quarter.

Net income for the quarter ended June 30, 2006, was $25.5 million compared to a net gain of $259,073 for the quarter ended June 30, 2005. The favorable result was caused by the recalculation of the Company's derivatives at quarter-end. The Company also reported gross profit of $1.7 million in the second quarter of 2006 compared with gross profit of $77,756 in the prior year's second quarter.

At June 30, 2006, the Company's balance sheet showed total assets of $43 million and total liabilities of $99 million resulting in a total shareholders' deficit of $56 million.

During the second quarter of 2006, the Company recorded an operating loss of $1.4 million, of which $231,500 resulted from non-cash items, comprised of stock-based compensation of $191,250 to employees and members of the board of directors and general and administrative and consulting expenses of $40,250, which were paid with the Company's common stock.

The Company also disclosed that its acquisition of the Viansa Winery has resulted in revenues for the six months endedJune 30, 2006, of approximately $8 million as compared to approximately $244,377 for the six months ended June 30, 2005.

Gross profit was reported to be at approximately $3 million for the first six months ended June 30, 2006, compared to approximately $203,922 in the prior year's first six months.

During the first six months of 2006, the Company recorded an Operating Loss of $24 million, of which, approximately $21.8 million resulted from non-cash items, comprised of stock-based compensation of employees and members of the board of directors of $13.3 million, marketing sponsorships of $4.5 million and general and administrative and consulting expenses of $4 million.

For the six months ended June 30, 2006, the Company disclosed that loss on discontinued operations was $2.5 million, relative to the KKLLC discontinued operation. The loss on the disposal of a discontinued operation of $900,000 was the result of the Springer Mining transaction.

360 Global Wine Company, through its subsidiaries, markets and distributes alcohol beverages in the wine category. The company offers various wines produced by Viansa and Kirkland Knightsbridge, LLC. Also it market products through retail locations and wine distributors.

Going Concern Doubt

David S. Hall, P.C., in Dallas, Texas, raised substantial doubt about 360 Global Wine Company's ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's operating losses since inception.

ADELPHIA COMMS: Paying $600MM in Cash & Stock to Restitution Fund-----------------------------------------------------------------In its Form 10-Q filed with the Securities and Exchange Commission on Aug. 14, 2006, Adelphia Communications Corporation disclosed that as a result of the ACOM Debtors' sale of substantially all of their assets to Time Warner NY Cable, LLC, and Comcast Corporation, ACOM's contribution to the Restitution Fund will consist of $600,000,000 in cash and stock, with at least $200,000,000 in cash, and 50% of the first $230,000,000 of future proceeds, if any, from certain litigation against third parties who injured ACOM.

The restitution fund is for the benefit of defrauded Adelphia investors.

ACOM's Chief Financial Officer Vanessa A. Wittman relates that unless extended on consent of the U.S. Attorney and the Securities and Exchange Commission, which consent may not be unreasonably withheld, ACOM must make those payments on or before the earlier of:

(i) October 15, 2006;

(ii) 120 days after confirmation of a stand-alone plan of reorganization; or

(iii) seven days after the first distribution of stock or cash to creditors under any plan of reorganization.

ACOM recorded charges of $425,000,000 and $175,000,000 during 2004 and 2002, related to the Non-Prosecution Agreement.

Pursuant to letter agreements with Time Warner NY and Comcast, the U.S. Attorney has agreed, notwithstanding ACOM's failure to comply with the Non-Prosecution Agreement, that it will not criminally prosecute any of the joint venture entities or their subsidiaries purchased from ACOM by Time Warner NY or Comcast pursuant to the asset purchase agreements dated April 20, 2005, as amended.

Under those letter agreements, Ms. Wittman says, each of Time Warner NY and Comcast have agreed that following the closing of the Sale Transaction, they will cooperate with the relevant governmental authorities' requests for information about ACOM's operations, finances and corporate governance between 1997 and confirmation of the Debtors' plan of reorganization.

The sole and exclusive remedy against Time Warner NY or Comcast for breach of any obligation in the letter agreements is a civil action for breach of contract seeking specific performance of such obligations. In addition, Time Warner NY and Comcast entered into letter agreements with the SEC agreeing that upon and after the closing of the Sale Transaction, Time Warner NY, Comcast and their affiliates will not be subject to, or have any obligation under, the final judgment consented to by ACOM in the SEC Civil Action.

About Adelphia Communications

Based in Coudersport, Pa., Adelphia Communications Corporation (OTC: ADELQ) -- http://www.adelphia.com/ -- is the fifth-largest cable television company in the country. Adelphia serves customers in 30 states and Puerto Rico, and offers analog and digital video services, high-speed Internet access and other advanced services over its broadband networks. The Company and its more than 200 affiliates filed for Chapter 11 protection in the Southern District of New York on June 25, 2002. Those cases are jointly administered under case number 02-41729. Willkie Farr & Gallagher represents the ACOM Debtors. PricewaterhouseCoopers serves as the Debtors' financial advisor. Kasowitz, Benson, Torres & Friedman, LLP, and Klee, Tuchin, Bogdanoff & Stern LLP represent the Official Committee of Unsecured Creditors.

Adelphia Cablevision Associates of Radnor, L.P., and 20 of its affiliates, collectively known as Rigas Manged Entities, are entities that were previously held or controlled by members of the Rigas family. In March 2006, the rights and titles to these entities were transferred to certain subsidiaries of Adelphia Cablevision, LLC. The RME Debtors filed for chapter 11 protection on March 31, 2006 (Bankr. S.D.N.Y. Case Nos. 06-10622 through 06-10642). Their cases are jointly administered under Adelphia Communications and its debtor-affiliates chapter 11 cases.(Adelphia Bankruptcy News, Issue Nos. 146; Bankruptcy Creditors'Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000)

ADELPHIA COMMS: Sells Lots, Frame Tower & Timber for $412,731-------------------------------------------------------------Pursuant to the Excess Assets Sale Procedures approved by the U.S. Bankruptcy Court for the Southern District of New York, Adelphia Communications Corp. and its debtor-affiliates inform the Court that they will sell these assets for $412,731:

Based in Coudersport, Pa., Adelphia Communications Corporation(OTC: ADELQ) -- http://www.adelphia.com/ -- is the fifth-largest cable television company in the country. Adelphia servescustomers in 30 states and Puerto Rico, and offers analog anddigital video services, high-speed Internet access and otheradvanced services over its broadband networks. The Company andits more than 200 affiliates filed for Chapter 11 protection inthe Southern District of New York on June 25, 2002. Those casesare jointly administered under case number 02-41729. Willkie Farr& Gallagher represents the ACOM Debtors. PricewaterhouseCoopersserves as the Debtors' financial advisor. Kasowitz, Benson,Torres & Friedman, LLP, and Klee, Tuchin, Bogdanoff & Stern LLPrepresent the Official Committee of Unsecured Creditors.

Adelphia Cablevision Associates of Radnor, L.P., and 20 of itsaffiliates, collectively known as Rigas Manged Entities, areentities that were previously held or controlled by members of theRigas family. In March 2006, the rights and titles to theseentities were transferred to certain subsidiaries of AdelphiaCablevision, LLC. The RME Debtors filed for chapter 11 protectionon March 31, 2006 (Bankr. S.D.N.Y. Case Nos. 06-10622 through06-10642). Their cases are jointly administered under AdelphiaCommunications and its debtor-affiliates chapter 11 cases.(Adelphia Bankruptcy News, Issue Nos. 146; Bankruptcy Creditors'Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000)

AH-DH APARTMENTS: Cornerstone Fails to Cut Plan-Filing Period -------------------------------------------------------------The Honorable Brenda T. Rhoades of the U.S. Bankruptcy Court for the Eastern District of Texas, Sherman Division, denied Cornerstone Capital Consulting, Inc.'s request to terminate the exclusive plan-filing period of AH-DH Apartments, Ltd., and its debtor-affiliates.

In an order dated Aug. 18, 2006, Judge Rhoades ruled that cause does not exist to terminate the Debtors' exclusivity. The Debtors submitted their Plan or Reorganization on July 3 but they have not submitted a Disclosure Statement to explain the Plan. Their exclusive plan-filing period ends on Sept. 18, 2006.

Cornerstone is a party in interest in the Debtors cases by virtue of the assignment to Cornerstone of at least one scheduled unsecured claim against each of the Debtors. Cornerstone sought to terminate the Debtors' exclusivity so that it can submit a competing Reorganization Plan.

As reported in the Troubled Company Reporter on July 26, 2006, Cornerstone complained that the Debtors' plan relies on a capital infusion from Vintage Capital Group, LLC, but neglects to provide information regarding Vintage's ability to fund the infusion. Cornerstone also complained that the Plan does not disclose how unsecured creditors will be paid or give any detail regarding the reorganization of Debtor Shadow Creek Apartments, Ltd.

Cornerstone further pointed to Citigroup Global Markets RealtyCorporation's recent request to lift the automatic stay so it canforeclose on its collateral. Citigroup has alleged that the Debtors' Plan is not in the process of confirmation but is only a place holder, seeking to hold creditors at bay.

Citigroup opposed Cornerstone's move to terminate the Debtors' exclusivity to the extent that it seeks to limit Citigroup's ability to terminate the automatic stay. Citigroup told the Court that Cornerstone should not be allowed to derail its efforts to protect its collateral especially since Cornerstone had scheduled unsecured claims totaling a mere $545.58.

About AH-DH Apartments

Headquartered in Plano, Texas, AH-DH Apartments, Ltd., owns 16apartment complexes. The company and three of its affiliatesfiled for chapter 11 protection on Mar. 22, 2006 (Bank. E.D. Tex.Case No. 06-40355). J. Mark Chevallier, Esq., at McGuire Craddock& Strother, P.C., represents the Debtors. When the Debtors filedfor protection from their creditors, they estimated assets anddebts between $50 million and $100 million.

AH-DH APARTMENTS: Court to Consider Lift-Stay Plea on September 18------------------------------------------------------------------The U.S. Bankruptcy Court for the Eastern District of Texas, Sherman Division, will continue the hearing, at 10:00 a.m., on Sept. 18, 2006, on Citigroup Global Market Realty Corporation, fka Salomon Brothers Realty Corporation's request for permission to foreclose on its liens and security interests in the properties of AH-DH Apartments, Ltd., and its debtor-affiliates.

Citigroup wants the Court to lift the automatic stay so it can foreclose on the Debtors' properties in order to prevent the alleged further erosion of the value of its collateral.

Citigroup Obligations

The Debtors owe Citigroup approximately $154 million on account of five notes executed between August 2001 and December 2003. The notes were secured by various multifamily real estate complexes located in Houston and Austin, Texas.

Citigroup claims that the properties securing the notes were supposed to be sold shortly after the notes were executed. According to Citigroup, no sale has occurred despite the Debtors' promises to work on the disposition of the properties.

Citigroup also argues the Debtors no longer have any equity on the collateral in view of its over $149 million claim and the $163 million appraised value of the properties less $24 million in deferred maintenance charges.

Debtors Respond

The Debtors maintain that they have equity in the properties and that these properties are necessary to their successful reorganization.

Mark Chevallier, Esq., at McGuire Craddock & Strother, PC, tells the Court there is no "cause" to lift the stay at this time since Citigroup is adequately protected, inter alia, because:

a) Citigroup is over-secured;

b) the Debtors have made, and continue to make, significant adequate protection payments pursuant to its cash collateral budgets with Citigroup;

c) the properties are properly insured and regularly maintained;

d) all taxes due are paid or escrowed; and

e) the Debtors are diligently pursuing a Plan supported by a proposed $25 million equity infusion from Vintage Capital Group, LLC.

About AH-DH Apartments

Headquartered in Plano, Texas, AH-DH Apartments, Ltd., owns 16apartment complexes. The company and three of its affiliatesfiled for chapter 11 protection on Mar. 22, 2006 (Bank. E.D. Tex.Case No. 06-40355). J. Mark Chevallier, Esq., at McGuire Craddock& Strother, P.C., represents the Debtors. When the Debtors filedfor protection from their creditors, they estimated assets anddebts between $50 million and $100 million.

ALLIANCE LEASING: Court Confirms Third Amended Plan of Liquidation------------------------------------------------------------------The Honorable George C. Paine of the U.S. Bankruptcy Court for the Middle District of Tennessee confirmed the Third Amended Plan of Liquidation of Alliance Leasing Corporation.

The Court determined that the Plan satisfies the 13 requirements stated in Section 1129(a) of the Bankruptcy Code.

Treatment of Claims

Total claims filed against the Debtor consists of $23.3 million ofsecured claims, $1.8 million of priority unsecured claims and$1.6 million of general unsecured claims.

Allowed Administrative Claims will be paid in full on theEffective Date of the Plan.

Holders of priority unsecured claims and other priority claimswill be get a pro-rata share of the estate cash after Administrative Claims and Priority Tax Claims are paid in full.

Holders of residual claims on the leased vehicles will retaintheir liens and will receive the proceeds from the liquidation ofthe collateral subject to that lien.

The alleged Trust Fund Claimants will receive pro rata payments iffunds are available after Administrative Claims, Priority TaxClaims, and other priority claims are paid in full.

General unsecured claimholders who are not insiders will receivepro rata payments if funds are available after AdministrativeClaims, Priority Tax Claims, other priority claims, and trustclaims are paid in full. Insiders will receive pro rata paymentsafter the non-insider General unsecured claimholders receive fullpayment of their claims.

AMERICAN REAL: S&P Upgrades Senior Debt's Rating to BB+ from BB---------------------------------------------------------------Standard & Poor's Rating Services raised its ratings on senior debt issued by New York City-based American Real Estate Partners L.P. to 'BB+' from 'BB.' The outlook is stable.

Standard & Poor's also assigned a rating to AREP's new $150 million senior secured revolving credit facility. This facility is rated 'BBB' (two notches higher than the counterparty credit rating).

Finally, the rating agency assigned a recovery rating of '1', indicating a high expectation of full recovery of principal in the event of payment default.

* a restricted ability of these companies to upstream dividends to the parent holding company; and

* the high degree of dependence on the investment prowess of one person-Carl Icahn.

Standard & Poor's view of the firm's creditworthiness has improved as its mix of investments evolved from primarily real estate-based to being more diversified. AREP's strategy is to invest and cultivate value in underperforming businesses by improving operational effectiveness or combining properties to achieve competitive advantage. AREP has assembled significant investments in four sectors:

* oil & gas, * gaming, * real estate, and * home fashion.

The stable outlook is predicated on AREP's stable funding profile, adequate liquidity, and the stable overall operating results from its portfolio of investments. Standard & Poor's will monitor the firm's leverage metrics, cash cushion, and profitability. The rating agency will also keep an eye on the evolution of the firm's investment mix and the drain that turnaround investments may place on cash flow.

An upgrade could result if the firm realizes a significant cash gain upon exiting one of its four major investments, and if Standard & Poor's is able to ascertain that proceeds would be used in a manner that resulted in a stronger, more stable capital position. Downward pressure on the rating could result from losses or deteriorating leverage metrics.

The decision to rate the bank loan two notches higher than the counterparty rating reflects Standard & Poor's view that the $1.4 billion in collateral distributed across AREP's moderately diversified portfolio is more than adequate to protect creditors providing the $150 million bank facility.

ASARCO LLC: FFIC Objects to London Market Insurers Settlement Pact------------------------------------------------------------------Fireman's Fund Insurance Company asks the U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi to deny the London Market Insurers Settlement Agreement.

Fireman's Fund Insurance Company, along with the participatingLondon Market Insurers, are defendants in the Texas CoverageLitigation. FFIC has appealed the Court order remanding theTexas Coverage Litigation to the state court, Anthony S. Cox,Esq., at Hermes Sargent Bates, in Dallas, Texas, relates.

Mr. Cox tells the Court that FFIC's insurance policies are morethan those issued by certain Participating LMI. FFIC'sobligations under the insurance policies are, in part, dependenton coverage provided by policies issued by the Participating LMI.

FFIC objects to the LMI Settlement Agreement to the extent that:

-- it creates any prejudice or impairments of its state law rights under its policies or otherwise under applicable law;

-- it effects any pre-emption of a full adjudication of its rights, claims and defenses in the Texas Coverage Litigation; and

-- it deprives FFIC of its rights to assert any possible state law contribution, indemnity and similar claims against any Participating LMI without providing an indubitably equivalent economic replacement ready.

FFIC seeks an adequate opportunity to complete meaningfuldiscovery, so that it can adequately prepare for the evidentiaryhearing on the Motion. If necessary, FFIC reserves the right toask the Court to defer the hearing on the Motion until it cancomplete its discovery.

Without the inclusion in any order approving the SettlementAgreement of appropriate provisions for adequate protection,insurer neutrality and other limiting language, Mr. Cox assertsthat the Settlement Agreement will:

(a) result in an unlawful expansion and creation of greater rights in ASARCO's prepetition insurance contracts;

(b) violate the mandatory requirement under Section 363(e) of the Bankruptcy Code to provide adequate protection of FFIC's claims and interests;

(c) effect an unconstitutional taking against any Participating LMI; and

(d) lack good faith that will preclude the requested finding under Section 363(m).

ASARCO LLC: Asbestos Panel & FCR Want AMC's Tax Motion Denied-------------------------------------------------------------The Official Committee of Unsecured Creditors for the Asbestos Subsidiary Debtors and Robert C. Pate, the future claims representative, asks the U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi to deny Americas Mining Corporation's request to compel the ASARCO LLC and its debtor-affiliates to decide whether to assume or reject the Tax Sharing Agreement and the Tax Sharing Amendment.

The Asbestos Committee and the FCR have preliminarily reviewed both the Tax Sharing Agreement and the Tax Sharing Amendment.

The Asbestos Committee and the FCR believe that an understandingof the effect of assumption or rejection requires an analysis ofnumerous provisions of the Internal Revenue Code of 1986 and ofthe Debtors' operations and finances.

Jacob L. Newton, Esq., at Stutzman, Bromberg, Esserman & Plifka,in Dallas, Texas, informs the Court that the Debtors have not yetprovided the Asbestos Committee and the FCR with any analysisdemonstrating the desirability or undesirability of assumption orrejection of the two agreements in question and the effect on notonly the Debtors' bankruptcy estates, but on the AsbestosDebtors' estates.

Mr. Newton notes that the Tax Sharing Amendment appears to havebeen entered into within the time periods set forth in Sections547 and 548 of the Bankruptcy Code. The Debtors should not becompelled to assume or reject either the Tax Sharing Agreement orthe Tax Sharing Amendment until an analysis is completed as tothe effect of those Bankruptcy Code provisions on the TaxingAgreements, Mr. Newton asserts.

ASARCO LLC: Can Execute IRS Forms for Tax Refunds-------------------------------------------------The U.S. Bankruptcy Court for the Southern District of Texas in Corpus Christi authorized ASARCO LLC to execute the Internal Revenue Service forms.

As reported in the Troubled Company Reporter on July 20, 2006,ASARCO Incorporated filed tax refund claims for $70,160,199 with the Internal Revenue Service on May 15, 2003. Pursuant to amerger deal between ASARCO, Inc., and ASARCO LLC in February2005, the Refund Claims is property of ASARCO LLC's bankruptcyestate, James R. Prince, Esq., at Baker Botts LLP, in Dallas,Texas, said.

The Refund Claims are based on the carry-back of specifiedliability losses from:

(a) tax years ending on Dec. 31, 1994, and 1995 to the tax year ending on Dec. 31, 1987;

(b) tax year ending on Dec. 31, 1998, to the tax year ending on Dec. 31, 1988; and

(c) tax year ending on Dec. 31, 1999, to the tax year ending on Dec. 31, 1989.

ASARCO particularly asserted that the environmental and workmen'sexpenditures it incurred qualified as specified liability lossesunder Section 172(f) of the Internal Revenue Code.

The IRS disputed ASARCO's assertions and maintained that theenvironmental expenditures did not qualify as SLLs. The IRSrequired ASARCO to provide documents supporting its argument.

In the last quarter of 2005, the IRS agreed to use statisticalsampling to determine the portion of ASARCO's environmentalexpenditures that would be classified as SLLs, Mr. Princerelates. Based on the statistical sampling, the IRS tentativelyagreed to allow $40,479,421 of the Refund Claims.

In May 2006, the Congressional Joint Committee on Taxationapproved the allowance of $40,479,421 of the Refund Claims. TheIRS notified ASARCO of the allowance, and indicated that thebalance of the Refund Claim is disallowed. Attached with theIRS' notice are:

(i) IRS Form 870 -- Offer of Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and of Acceptance of Overassessment; and

(ii) IRS Form 3363 -- Acceptance of Proposed Disallowance of Claim for Refund or Credit.

For the IRS to pay the allowed Refund Claims, ASARCO is requiredto first execute the IRS Forms. If ASARCO does not sign the IRSForms, the Refund Claims will be disputed and referred to the IRSAppeals Division. The IRS further warned ASARCO that no portionof the Tax Refund would be paid until the dispute is resolved andapproved by the Joint Committee on Taxation.

Mr. Prince notes that if ASARCO signs the IRS Forms, ASARCO wouldwaive its right to have the IRS reconsider the Refund Claims aspart of the current administrative proceedings. However, a reconsideration of the disallowed Refund Claims would unlikelyresult in a more favorable resolution of the Claims, Mr. Princesays.

By signing the IRS forms, ASARCO would not in any way waive itsright to pursue litigation for any disallowed portion of the Refund Claims either in the District Court or in the Claims Court, Mr. Prince added.

By executing the IRS forms, ASARCO will avoid additional expenses with respect to the Tax Refund. By separating the allowed amount from the disputed amount, ASARCO narrowed the focus of future litigation, Mr. Prince pointed out.

AVANI INTERNATIONAL: June 30 Capital Deficit Widens to $128,775---------------------------------------------------------------Avani International Group Inc. filed its second quarter financial statements for the three months ended June 30, 2006, with the Securities and Exchange Commission on Aug. 11, 2006.

At June 30, 2006, the Company's balance sheet showed $1,140,878 in total assets and $1,269,653 in total liabilities, resulting in a $128,775 capital deficit. The Company reported a $32,167 deficit at Dec. 31, 2005.

Avani reported a $19,026 net loss on $84,827 of total revenues for the three months ended June 30, 2006, compared with a $103,785 net loss on $474,224 of total revenues for the same period in 2005.

Revenues for the six months ended June 30, 2006, were $101,093 representing a decrease of $761,552 or 88.28% from revenues of $853,319 for the same period in 2005. The significant decrease in revenues reflects the deterioration and ultimately the termination of the business relationship with Avani O2, as well as the de-consolidation of Avani O2 as a VIE, all of which occurred during the 2005 period. Revenues for the 2005 period also included $9,326 in cooler rentals and sales. The Company sold its cooler rental and sales business in July 2005, and thus had no corresponding revenue for the 2006 period.

Cost of revenue, which includes depreciation for the six-month period in 2006 totaled $191,163, a decrease of $328,740 or 63.2% from $519,903 for the same period in 2005.

Cost of revenue for the six-month period ended June 30, 2006, consisted of costs of goods sold consisting of $142,950 in bottled water, supplies, coolers, and related equipment, and delivery costs (a decrease of $288,587 or 66.9% from $431,537 for the prior period) and $48,366 in depreciation (a decrease of $40,153 or 45.4% from $88,366 for the same period in prior year).

The decrease in cost of goods sold for the 2006 period compared with the prior period is due mainly to lower material and labor costs associated with the reduced production levels.

The reduction in depreciation for the 2006 period is due to the write off of the Malaysian equipment held by Avani O2 in July 2005.

Gross loss for the six-month period ended June 30, 2006, was $90,070, a decrease of $252,672 or 126% from gross profit of $342,742 for the same period in 2005.

Operating expenses, which includes marketing expenses, and general and administrative expenses for the six-month period ended June 30, 2006, totaled $24,750, a decrease of $1,535 or 5.8% from $26,285 for the same period in 2005.

General and administrative costs were $284,172 in 2006, a decrease of $91,650 or 24.45% from $375,822 in the prior period. The decrease is due principally to reduced employees and payroll, which resulted from sale of 5-gallon business.

Marketing expenses totaled $26,285 for the six-month period in 2006 representing a decrease of $1,535 or 5.8% from $26,285 for the prior period.

The relatively constant marketing expenses reflect the Company's decision in the fourth quarter of 2004 to reduce overall international marketing expenses, particularly in Malaysia.

During 2005, the Company wrote off a receivable from Avani O2 in the amount of $1,240,811. There was no write off for the 2006 period.

The Company experienced a foreign exchange loss of $32,386 in 2006 compared with a gain of $7,202 in 2005 due to a reduction in the volume of currency exchange transactions and limited fluctuation of the exchange rates between U.S. currency and Canadian currency compared to the same period of prior year.

For the 2006 period, the Company experienced a gain in the amount of $252,230 on the sale of its real estate assets.

Loss from operations for the 2006 period is $179,148 compared with a loss of $1,292,974 for the comparable period 2005.

During the 2006 period, the Company recorded interest on debts payable of $3,514 compared with $3,238 for the 2005 period. Miscellaneous income was $0 in 2006 compared with $2,278 in 2005, which principally represents taxes paid by Avani O2.

Comprehensive loss for the 2006 period was $121,608 compared with a loss of $311,139 for the same period in 2005.

Liquidity and Capital Resources

As of June 30, 2006, the Company had working capital of $78,882. Working capital deficit as of Dec. 31, 2005, was $689,799. The increase in working capital is principally a result of the gain experienced on the sale of the Company's real estate, partially offset by the consolidated loss of the Company for the first fiscal quarter of 2006.

The Company has entered into an agreement to sell its real estate located in Canada and intend to re-locate is water manufacturing business to Malaysia. The Company intends to use the proceeds from the sale of its real estate to fund re-location efforts, and to fund in initial operating capital.

Sale of Assets

On June 15, 2006, the Company sold its real property including land, building and building improvements, for proceeds of approximately $1,018,895. The net book value of its real property was approximately $766,665 on June 15, 2006, and the sale generated a gain of $252,230. After the sale of its real property, its production of water was discontinued.

As reported in the Troubled Company Reporter on April 26, 2006,Jeffrey Tsang & Co. in Hong Kong raised substantial doubt aboutAvani International Group Inc.'s ability to continue as a goingconcern after auditing the company's consolidated financialstatements for the year ended Dec. 31, 2005. The auditors pointedto the company's recurring losses from operations.

About Avani International Group

Avani International Group Inc. -- http://www.avaniwater.com/-- produces, markets, and sells purified, oxygen enriched water underthe brand name Avani Water. The Company utilizes a technology,which injects oxygen into purified water. The Company sells itsproduct in the greater Vancouver metropolitan area andinternationally in the United States, Taiwan, Korea, Hong Kong,Malaysia, Japan, and Australia. The company has two wholly ownedsubsidiaries: Avani Oxygen Water Corporation fka Avani WaterCorporation, and Avani International Marketing Corporation.

ASIA PREMIUM: Balance Sheet Upside-Down by $2.7 Million at June 30------------------------------------------------------------------Asia Premium Television Group, Inc., earned $580,654 of net income on $20,491,876 of revenues on the second quarter ending June 30, 2006, the Company disclosed on a Form 10-Q filing delivered to the Securities and Exchange Commission on Aug. 11, 2006.

As of June 30, 2006, the Asia Premium's balance sheet showed $21,467,223 in assets and $23,585,978 in liabilities. The Company's equity deficit narrowed to $2,118,755 as of June 30, 2006, from a $2,702,824 equity deficit at Dec. 31, 2005. The Company had $20,507,372 in current assets at June 30, 2006, available to pay off $23,518,441 of debts due in the next 12 months.

The Company's net cash provided by operating activities increased to $3.4 million for the three months ended June 30, 2006, compared to $1.6 million for the three months ended June 30, 2005. This increase was primarily due to an increase in accounts payable and other payables.

Net cash used by investing activities increased to $200,000 for the three months ended June 30, 2006, compared to net cash used by investing activities of $100,000 for the three months ended June 30, 2005, due primarily to increases in payments for property and equipment and a note receivable.

Net cash used by financing activities was $50,000 in the three months ended June 30, 2006, as compared to $10,000 during the three months ended June 30, 2005. This change was primarily due to a decrease in advances payable to related parties in the three months ended June 30, 2006, as compared to the same period in 2005.

Going Concern Doubt

The Company's management expressed substantial doubt about the Company's ability to continue as a going concern due to liquidity problems. However, management believes the going concern is mitigated because of these factors:

a) convertible notes payable in the amount of $4,000,000 is included in current liabilities but the note is held by a significant shareholder and will be repaid by conversion into common stock;

b) the Company has shown a net profit in each of the two most recent fiscal years and expects the trend to continue; and

c) the Company has generated positive cash flows in each of the two most recent fiscal years and expects the trend to continue.

Mr. Chieffe will replace Dana Snyder, who had been serving as president and chief executive officer of the Company for an interim period. Mr. Chieffe joins the Company from Kraftmaid Cabinetry, Inc., where he served as president and chief executive officer. Mr. Chieffe has over 25 years of experience in various operating disciplines, including leadership roles in manufacturing and finance.

In a joint statement, Chris Stadler, Managing Director of Investcorp and Ira Kleinman, Managing Director of Harvest Partners, said, "After our thorough search process, we are pleased that Tom has accepted this position. At Kraftmaid, Tom drove substantial revenue growth utilizing a multiple brand strategy through various distribution channels. He also improved profitability by focusing on cost and quality improvement. We are confident that Tom's strategic leadership and operating skills will help drive improvements in AMI's performance in the future."

The Company is a wholly owned subsidiary of Associated Materials Holdings Inc., which is a wholly owned subsidiary of AMH Holdings, Inc. AMH is a wholly owned subsidiary of AMH Holdings II, Inc. which is controlled by affiliates of Investcorp S.A. and Harvest Partners, Inc. Holdings, AMH and AMH II do not have material assets or operations other than a direct or indirect ownership of the common stock of the Company.

About Investcorp

Investcorp -- http://www.investcorp.com/-- is a global asset management firm specializing in alternative investments with offices in New York, London and Bahrain. The firm has four products: private equity, hedge funds, real estate investment and venture capital. It was established in 1982 and currently manages total investments in alternative assets of around $10 billion.

About Harvest Partners

Harvest Partners -- at http://www.harvpart.com/-- is a private equity investment firm. Founded in 1981, Harvest Partners has approximately $1 billion of invested capital under management.

Headquartered in Akron, Ohio, Associated Materials Incorporated-- http://www.associatedmaterials.com/-- manufactures exterior residential building products, which are distributed through company-owned distribution centers and independent distributors across North America. AMI produces a broad range of vinyl windows, vinyl siding, aluminum trim coil, aluminum and steel siding and accessories, as well as vinyl fencing, decking and railing. AMI is a privately held, wholly owned subsidiary of Associated Materials Holdings Inc., a wholly owned subsidiary of AMH, a wholly owned subsidiary of AMH II, which is controlled by affiliates of Harvest Partners, Inc., and Investcorp S.A.

* * *

Moody's downgraded the ratings of Associated Materials Inc. and its holding company AMH Holdings, Inc. AMH Holdings' corporate family rating and ratings on the AMI's senior secured credit facilities were downgraded to B3 from B2, effective Jan. 19, 2006. Moody's said the ratings outlook is stable.

BERTHEL GROWTH: Posts $130,238 Net Loss in Quarter Ended June 30---------------------------------------------------------------- For the three months ended June 30, 2006, Berthel Growth & Income Trust I incurred net investment loss of $130,238 from total revenues of $36,626.

At June 30, 2006, the Company reported total net liabilities of $5,016,429 from total assets of $6,405,161 and total liabilities of $11,421,590.

A full-text copy of the Company's financial report for the three months ended June 30, 2006 is available for free at:

BNS HOLDING: Posts $94,000 Net Loss in Quarter Ended June 30------------------------------------------------------------ BNS Holding Inc. incurred net loss of $94,000 for the three months ended June 30, 2006. Its operating loss for the three months ended June 30, 2006 of $329,000 was $94,000 lower than the three months ended June 30, 2005, while its operating loss for the six months ended June 30, 2006 was $646,000 higher than the six months ended June 30, 2005.

The Company states that while it has continued to reduce corporate level administration expenses over last year, management believes there is little opportunity for further reduction without the acquisition of an operating business.

The Company says that its operating losses for 2006 and 2005 include legal and professional costs incurred in connection with ongoing litigation, and the sale of assets and exploration of strategic alternatives.

For the Company's other income, the net amounted to $235,000 and $439,000 for the three and six months ended June 30, 2006, respectively, compared with $67,000 and $106,000 for the three and six months ended June 30, 2005. Other income, net for all periods consists primarily of interest income.

BNS Holding's balance sheet at June 30, 2006 showed total assets of $20,834,000, total liabilities of $1,047,000, and total shareowners' equity of $19,787,000.

A full-text copy of the Company's financial report for the three months ended June 30, 2006 is available for free at:

As reported in the Troubled Company Reporter on Mar. 17, 2006,Ernst & Young LLP expressed substantial doubt about BNS Holding, Inc.'s ability to continue as a going concern after auditing theCompany's financial statements for the year ended Dec. 31, 2005. The auditing firm pointed to the fact that BNS Holding presentlyhas no active trade or business operations.

Headquartered in Middletown, Rhode Island, BNS Holding Inc. isthe parent of BNS Company. BNS Co. was engaged in the MetrologyBusiness and in the design, manufacture and sale of precisionmeasuring tools and instruments and manual and computer controlled measuring machines. The Company at present has no active trade or business operations but is searching for a suitable business to acquire.

CATHOLIC CHURCH: Parties Object to Spokane's Indiana Settlement---------------------------------------------------------------The Catholic Diocese of Spokane asked the U.S. Bankruptcy Court for the Eastern District of Washington to approve a Settlement, Release and Policy Buyback Agreement with Indiana InsuranceCompany, as reported in the Troubled Company Reporter on Aug. 11, 2006.

The principal terms of the Settlement Agreement were:

(a) Indiana will pay $2,750,000 to the Diocese;

(b) The Diocese will use the settlement amount solely for indemnity payments for Tort Claims related to individuals alleging injury;

(c) The Diocese and Indiana will execute mutual releases, including that:

-- The Diocese will dismiss, with prejudice, its claims against Indiana in the Coverage Action and sell the Policies back to Indiana free and clear of all liens, claims, encumbrances and other interests, with the sole exception of the rights, if any, held by Morning Star; and

-- Indiana will release all claims for reimbursement of the $325,000 in defense and indemnity claims already paid for Tort Claims against the Diocese; and

(d) If the Diocese proposes a plan of reorganization that channels Tort Claims to a trust, it will use its best efforts to include a channeling injunction that protects Indiana against the assertion of Tort Claims.

Objections

(A) Tort Committee

George E. Frasier, Esq., at Riddell Williams P.S., in Seattle, Washington, asserts that the Catholic Spokane's proposed settlement agreement with Indiana Insurance Company inappropriately predetermines important provisions of any plan of reorganization.

The language of the Settlement, Mr. Frasier says, is ambiguous since payment of "indemnity for Tort Claims" on its face seems to contemplate payment to a third party which has itself paid tort claims, instead of direct payment of tort claims to tort claimants.

Even if the Settlement provision permits direct payment to tort claimants, Mr. Frasier contends, it appears to prohibit payment of expenses of a claims resolution facility.

Additionally, Mr. Frasier says the Settlement Agreement also appears to release Indiana Insurance before the settlement funds are paid to the Diocese.

For these reasons, the Official Committee of Tort Claimants asks the U.S. Bankruptcy Court for the Eastern District of Washington to deny the Diocese's request.

Mr. Nasatir relates that there is evidence that an excess policy was issued to the Diocese for the 1977 and 1978 policy periods, providing an additional $2,000,000 in coverage for each year.

While it is unclear from the documents supplied by the Diocese who issued the policy, Mr. Nasatir says the Settlement Agreement covers not just the primary policy, but any and all insurance policies of any kind ever actually or allegedly entered into between the Diocese and Indiana Insurance.

Mr. Nasatir contends that the fairness or reasonableness of the Settlement Agreement cannot be properly assessed because:

(1) the declarations of the Diocese's attorneys regarding reasonableness and fairness of the Settlement Agreement are unsupported. Many questions remain about why $2,750,000 is a justifiable settlement of the Indiana Insurance's policy proceeds;

(2) the Settlement Motion is devoid of any information as to how the $2,750,000 settlement amount compares to the maximum and minimum range of recoveries the Diocese has concluded the victims within the 1977 and 1978 coverage years could be entitled to;

(3) it is very difficult to understand what value to ascribe to the release of Indiana Insurance from any obligations under policies whose limits are not even addressed;

(4) the Settlement Agreement and the Proposed Order are inconsistent in describing how the settlement sum can be used;

(5) there is a tendency for other claimants who are not victims claiming against the Diocese for sexual or physical abuse to share in the settlement proceeds simply because of the manner in which the Settlement Agreement defines Tort Claims; and

(6) the Settlement Agreement and Proposed Order contain provisions that may be illegal or unenforceable, or both.

(C) FCR

Gayle E. Bush, in his capacity as Future Claims Representative, says the settlement agreement with Indiana provides no assurance that the interests of Future Tort Claimants are protected in case of a sale of the insurance policies.

Specifically, Mr. Bush objects to the provision regarding the restricted use of the settlement funds. In addition, the Settlement Agreement does not explain or discuss the Diocese's inclusion of a provision that the Bankruptcy Court make a finding that all claims held by "causal link" claimants whose interests are represented by the Future Claims Representative, are "claims" as the term is defined in Section 101(5) of the Bankruptcy Code.

Mr. Bush, therefore, asks the Court to deny the Diocese's request unless the proposed changes and clarifications or assurances are effected.

(D) Association of Parishes

John D. Munding, Esq., at Crumb & Munding, P.S., in Spokane, Washington, tells Judge Williams that the Association of Parishes does not oppose the settlement with respect to the Coverage Action pending in the District Court.

However, to the extent the Settlement purports to prevent any use of the proceeds of the settlement for the defense and indemnification of parishes, and intends to "earmark" the proceeds for the payment of sexual abuse tort claims in the bankruptcy proceeding, then the terms and conditions impair the parishes' ability to assert their rights to the proceeds of the proposed settlement, Mr. Munding points out.

Accordingly, the Association of Parishes wants any order approving the Settlement to reserve the parishes' right to make legal claim to the insurance settlement proceeds, if and when the parishes' rights to defense and indemnity are ever implicated.

The AOP represents the individual parishes located in the Spokane Diocese. The parishes are unincorporated associations under applicable Washington law, hence, are capable of bringing suit or being sued.

Mr. Munding says there is a possibility that individual parishes at which abuse took place may, at least in theory, be sued. To the extent a parish may be sued, the parish has a legally protected interest in each of the insurance policies that are covered by the Indiana Settlement, and in the normal course of events, should any lawsuit occur within a coverage period that is within either the coverage period, that lawsuit would be tendered for defense and indemnification as is normally the case,Mr. Munding says. All funds used to pay the premiums for the policies originated or came from the 82 parishes, he points out.

(E) Morning Star Boys' Ranch

The Morning Star Boys' Ranch takes no position with respect to the $2,750,000 "buy back" sum with Indiana Insurance, but objects to any conclusion, finding, or order that those:

(a) amounts in any way affect either of Indiana's duty to defend or to provide a defense on behalf of Morning Star in existing and future sexual abuse claims; or

(b) settlements in any way affect or limit the indemnity coverage available to Morning Star for pending or threatened or future sexual abuse claims.

Christopher J. Kerley, Esq., at Keefe, King & Bowman, P.S., in Spokane, Washington, relates that Morning Star has been individually named as a defendant in proceedings arising from alleged sexual abuse involving priests or clergy affiliated or associated with the Spokane Bishop, his predecessors, or the Spokane Diocese.

Mr. Kerley adds that Morning Star paid for and is entitled to all benefits under the insurance coverage afforded under each policy, is or may be an additional named insured under each policy, and is an intended beneficiary under any and all relevant and applicable policies issued by Indiana Insurance.

It is conceivable that other sexual abuse claims may be made against Morning Star Boys' Ranch in the future, Mr. Kerley points out. None of the pending sexual abuse claimants have reduced their claims to judgment. Nonetheless, Morning Star Boys has a legally protected interest in each insurance policy.

Mr. Kerley says the Indiana Settlement is silent or otherwise inconclusive with respect to Morning Star's rights in the policies and coverages for claims arising under the policies.

To the extent that there are any pending claims against Morning Star covered under the policies, Mr. Kerley contends that Morning Star is entitled to coverage under the policy including:

* coverage for payment of reasonable attorney's fees for defenses and costs of litigation against the claims asserted by third parties; and

* indemnity pursuant to the terms and conditions of the policy for any judgments or recoveries obtained or for settlements reached.

CATHOLIC CHURCH: More Objections to Spokane & GICA's $5.25MM Pact-----------------------------------------------------------------The Diocese of Spokane and General Insurance Company of America entered into a settlement agreement to resolve their disputes, as reported in the Troubled Company Reporter on July 12, 2006.

The Diocese asked the U.S. Bankruptcy Court for the EasternDistrict of Washington to:

(i) approve the Settlement Agreement with GICA;

(ii) permit the Diocese to sell back the GICA Policies pursuant to the terms of the Settlement Agreement, free and clear of liens, claims, encumbrances, and other interests, other than the alleged rights, claims, or interest of Morning Star Boys' Ranch, if any;

(iii) find that claims held by "causal link" claimants are "claims" as that term is defined in Section 101(5) of the Bankruptcy Code; and

(iv) find that GICA is a good faith purchaser entitled to the protections of Section 363(m).

Additional Objections

(A) Tort Committee

Joseph E. Shickich, Jr., Esq., at Riddell Williams P.S., in Seattle, Washington, points out that the proposed settlement agreement with General Insurance Company of America:

(a) denies the Catholic Diocese of Spokane access to the settlement funds until October 1, 2007; and

(b) prohibits the use of the funds for any purpose other than payment of indemnity for tort claims without apparent business purpose and apparently in furtherance of Spokane's already disapproved settlement with 75 tort claimants represented by certain tort lawyers.

The Settlement provisions, Mr. Shickich says, inappropriately predetermine important provisions of any plan of reorganization. The proposed Settlement Agreement also appear to release GICA before the settlement funds become the property of the Diocese and at a time when the funds may revert to GICA.

(B) Tort Litigants Committee

The Official Committee of Tort Litigants says many questions remain about why the $5,250,000 is a justifiable settlement of all insurance policy proceeds when, based on the policy terms, GICA has a $28,000,000 potential maximum exposure to the Diocese.

Iain A.W. Nasatir, Esq., at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, LLP, in Los Angeles, California, explains that the $28,000,000 potential maximum exposure represents 14 consecutive years of liability coverage, from 1958 to 1972. From the Diocese's documents, GICA had a $200,000 potential exposure per claim with a $2,000,000 maximum exposure. Fourteen years multiplied by the $2,000,000 yearly cap is $28,000,000 in potential maximum exposure.

The Settlement Motion, Mr. Nasatir asserts, does not provide evidence sufficient to assess whether the Settlement Agreement is fair or reasonable:

* The Settlement Motion is devoid of any information as to how the $5,250,000 settlement amount compares to the maximum and minimum range of recoveries the Diocese has concluded the victims could be entitled to within 14 years of GICA's coverage;

* There are inconsistencies and confusion regarding how the $5,250,000 can be used because it is unclear to whom the proceeds are to be paid and for what; and

* There exists a possibility for one of the named insureds -- like a school or any association affiliated with the Diocese -- to make a claim against GICA.

If any of those insureds claimants come forward, Mr. Nasatir says GICA, at the very least, could make an administrative claim against Spokane for attorney's fees. This potential burden on the estate, Mr. Nasatir points out, does not only affect distributions to creditor, but might even affect the $5,250,000 settlement sum which, according to the Settlement Agreement, can be utilized presumably paying administrative claims ahead of unsecured creditor claims.

Mr. Nasatir also notes the Settlement Agreement and its proposed order contain provisions that may be illegal or unenforceable:

(1) The sale of GICA policies and the proposed "buy back" may violate Section 48.18.320 of the Revised Code of Washington; and

(2) The proposed Bar Order may violate case and statutory law because it constitutes an impermissible permanent injunction enjoining non-debtor third parties from bringing actions against other non-debtor third parties.

For these reasons, the Tort Litigants Committee asks Judge Williams to deny the Diocese's Settlement Motion.

CKRUSH INC: June 30 Stockholders' Deficit Narrows to $11.4 Million------------------------------------------------------------------Ckrush, Inc., filed its second quarter consolidated financial statements for the three months ended June 30, 2006, with the Securities and Exchange Commission on Aug. 11, 2006.

The Company reported a $5,443,831 net loss on $15,250 of net revenue for the three months ended June 30, 2006, compared with a $1,653,509 net loss on $226,691 of net revenue for the same period in 2005.

At June 30, 2006, the Company's balance sheet showed $5,037,282 in total assets, $11,171,862 in total liabilities and $5,305,525 in minority interests, resulting in an $11,440,105 stockholders' deficit. The Company reported a $12,302,502 deficit at Dec. 31, 2005.

As reported in the Troubled Company Reporter on April 26, 2006,Rosenberg Rich Baker Berman & Company in Bridgewater, New Jersey,raised substantial doubt about Ckrush, Inc.'s ability to continueas a going concern after auditing the company's consolidatedfinancial statements for the year ended Dec. 31, 2005. Theauditors pointed to the company's operating losses and workingcapital deficiency.

About Ckrush

Headquartered in New York City, Ckrush, Inc. (CKRH) --http://www.ckrush.net/-- is an independent producer of entertainment and sports content for distribution to all mediaplatforms. The company produce programming for pay-per-view,video-on-demand, international markets, as well as, for retail anddirect response sale. The company also produces televised sportsevents and hold promotional rights to professional boxers.

COLLINS & AIKMAN: Sees August 31 Plan of Reorganization Filing--------------------------------------------------------------Collins & Aikman Corporation and its debtor-affiliates report that negotiations regarding the terms of a plan of reorganization with their major constituencies and potential investors have intensified in recent weeks.

As a result, the Debtors expect to file on Aug. 31, 2006, a plan of reorganization and accompanying disclosure statement supported by the members of the Steering Committee for their senior, secured prepetition lenders.

The Plan contemplates that prepetition lenders will receive equity in Reorganized Collins & Aikman as primary consideration for the great majority of their claims.

The Debtors, however, note that an agreement regarding the treatment of unsecured claims has not yet been reached with the Official Committee of Unsecured Creditors and the Steering Committee. Discussions among the parties are ongoing, and the Debtors are hopeful that a mutually agreeable settlement may be reached.

The Debtors believe that the Plan will allow them to save thousands of jobs and emerge from Chapter 11 as a substantiallyde-leveraged and competitive going concern enterprise.

Headquartered in Troy, Michigan, Collins & Aikman Corporation-- http://www.collinsaikman.com/-- is a global leader in cockpit modules and automotive floor and acoustic systems and is a leadingsupplier of instrument panels, automotive fabric, plastic-basedtrim, and convertible top systems. The Company has a workforce ofapproximately 23,000 and a network of more than 100 technicalcenters, sales offices and manufacturing sites in 17 countriesthroughout the world. The Company and its debtor-affiliates filedfor chapter 11 protection on May 17, 2005 (Bankr. E.D. Mich. CaseNo. 05-55927). Richard M. Cieri, Esq., at Kirkland & Ellis LLP,represents C&A in its restructuring. Lazard Freres & Co., LLC,provides the Debtor with investment banking services. Michael S.Stammer, Esq., at Akin Gump Strauss Hauer & Feld LLP, representsthe Official Committee of Unsecured Creditors Committee. When theDebtors filed for protection from their creditors, they listed$3,196,700,000 in total assets and $2,856,600,000 in total debts.(Collins & Aikman Bankruptcy News, Issue No. 38; BankruptcyCreditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000)

COLLINS & AIKMAN: Wants to Defer Interest Payments to JPMorgan--------------------------------------------------------------The U.S. Bankruptcy Court for the Eastern District of Michigan will convene a hearing at 2:00 p.m. today to consider Collins & Aikman Corporation and its debtor-affiliates' request to defer their obligation to pay certain postpetition interest.

Before they filed for bankruptcy, the Debtors borrowed money on a secured basis under a Credit Agreement, dated Dec. 30, 2001, as amended and restated as of Sept. 1, 2004, among Collins & Aikman Products Co., certain lenders and JPMorgan Chase Bank, N.A., as administrative agent.

As of the Petition Date, the Debtors owed their Prepetition Lenders $686,776,384 in respect of loans made and $61,223,616 inrespect of letters of credit issued, exclusive of interest andfees. To secure repayment of their obligations, the Debtorsgranted their Lenders liens and security interests on all oftheir cash, proceeds, and cash equivalents.

The Court has authorized the Debtors to use Cash Collateral in which their Prepetition Lenders have an interest and grant adequate protection to their Lenders with respect to the use of the Cash Collateral and all use and diminution in the value of the Collateral.

The Debtors were authorized to, among other things, pay in full,in cash to JPMorgan, as prepetition agent, on the first business day of each month, all accrued but unpaid interest on the Prepetition Debt at the prevailing LIBOR rate.

Ray C. Schrock, Esq., at Kirkland & Ellis LLP, in Chicago, Illinois, relates that postpetition interest payments and letterof credit fees payable to the Prepetition Lenders are about$7.2 million per month. Next payments are due on Sept. 1, 2006.

Mr. Schrock reports that negotiations with major constituencies and potential investors concerning the terms of a plan of reorganization have intensified in recent weeks. The Debtors intend to file a plan of reorganization -- which will have the support of the members of the steering committee for their senior, secured prepetition lenders -- on Aug. 31, 2006.

According to Mr. Schrock, the Debtors and the members of the Steering Committee have agreed that the Debtors will propose a Plan that contemplates the Prepetition Lenders receiving consideration other than cash -- namely equity in reorganized Collins & Aikman -- as the primary consideration for the great majority of their claims.

In light of the imminent Plan filing, the Prepetition Lenders'proposed treatment in that Plan and the Debtors' currentliquidity position, the Debtors ask the Court to allow them todefer their obligation to pay postpetition interest that wouldotherwise be due on the 1st business day of the month for themonths of September, October, November and December 2006.

JPMorgan and the members of the Steering Committee have consented to the deferral of the postpetition interest payments.

Headquartered in Troy, Michigan, Collins & Aikman Corporation-- http://www.collinsaikman.com/-- is a global leader in cockpit modules and automotive floor and acoustic systems and is a leadingsupplier of instrument panels, automotive fabric, plastic-basedtrim, and convertible top systems. The Company has a workforce ofapproximately 23,000 and a network of more than 100 technicalcenters, sales offices and manufacturing sites in 17 countriesthroughout the world. The Company and its debtor-affiliates filedfor chapter 11 protection on May 17, 2005 (Bankr. E.D. Mich. CaseNo. 05-55927). Richard M. Cieri, Esq., at Kirkland & Ellis LLP,represents C&A in its restructuring. Lazard Freres & Co., LLC,provides the Debtor with investment banking services. Michael S.Stammer, Esq., at Akin Gump Strauss Hauer & Feld LLP, representsthe Official Committee of Unsecured Creditors Committee. When theDebtors filed for protection from their creditors, they listed$3,196,700,000 in total assets and $2,856,600,000 in total debts.(Collins & Aikman Bankruptcy News, Issue No. 38; BankruptcyCreditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000)

COMVERSE TECH: Subsidiary to Acquire Netonomy(R) for $19 Million---------------------------------------------------------------- Comverse, a subsidiary of Comverse Technology, Inc., has signeda definitive agreement to acquire privately-held Netonomy for approximately $19 million in cash.

"Joining Comverse was a natural move," said John Ball, CEO of Netonomy. "Service providers need to accelerate the adoption of direct self-service quicker than ever to lower their cost of acquisition and service, regardless of market segment. Web access to select and change plans and features also improves customer satisfaction and loyalty, while reducing operational costs."

As reported in the Troubled Company Reporter on May 4, 2006,Standard & Poor's Ratings Services held its ratings on ComverseTechnology Inc. on CreditWatch with negative implications, wherethey were placed on March 15, 2006, on the disclosure that theboard of directors at Comverse had created a special committee toreview matters relating to the company's stock option grants andthe likely need to restate prior-period financial results.

As reported in the Troubled Company Reporter on March 17, 2006,Standard & Poor's placed its corporate credit and senior unsecured debt ratings on Comverse Technology on CreditWatch with negative implications. The company has S&P's 'BB-' corporate credit and senior unsecured debt ratings.

CONGOLEUM CORP: Century Insurers to Buy Back Policies for $16.95MM------------------------------------------------------------------Congoleum Corp. and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of New Jersey to approve their settlement and policy buyback agreement with Century Indemnity Company on behalf of all of Century's affiliates.

The Century Entities issued certain insurance policies under which the Debtors are insureds or claim to be entitled to insurance. Congoleum and the Century Entities dispute whether, and to what extent, those policies afford coverage for:

(1) all asbestos claims that may be subject to a claimant agreement;

(2) all other asbestos claims; and

(3) all non asbestos-related claims such as environmental and other general liability claims.

In addition, Century has asserted counterclaims for affirmative relief. The policies issued by Century at issue in the coverage dispute are those that Congoleum contends afford it coverage for asbestos-related claims, and those policies are a subset of the group of policies.

To resolve the Coverage Dispute, as well as all of the other contested matters the Debtors' chapter 11 cases, the parties have entered into the Settlement and Buyback Agreement. The Official Representative for Future Asbestos Claimants and the Asbestos Creditors Committee participated in the negotiations of the Settlement and Buyback Agreement and support its approval.

To settle the outstanding disputes and to purchase the Debtors' interests in the policies, Century agrees to pay $16.95 million to a Plan Trust to be created to pay asbestos claimants.

Based in Mercerville, New Jersey, Congoleum Corporation (AMEX:CGM)-- http://www.congoleum.com/-- manufactures and sells resilient sheet and tile floor covering products with a wide variety ofproduct features, designs and colors. The Company filed forchapter 11 protection on Dec. 31, 2003 (Bankr. N.J. Case No.03-51524) as a means to resolve claims asserted against it relatedto the use of asbestos in its products decades ago.

CONSOLIDATED CONTAINER: Fails to File 2nd Qtr. Financials on Time-----------------------------------------------------------------Consolidated Container Company LLC has informed the Securities and Exchange that it will be unable to finalize and file its Form 10-Q for the quarter ended June 30, 2006, until it completes the evaluation of a settlement.

The Company is in the process of evaluating the accounting implications of an expected settlement with a customer that relates to supply contracts and covers matters arising prior to July 1, 2006.

Consolidated says, at this point, it is still unable to determine if there will be any significant change in results of operations for the corresponding period in the last fiscal year that will be reflected by the earnings statements to be included in the second quarter Form 10-Q.

Headquartered in Atlanta, Georgia, Consolidated Container CompanyLLC -- http://www.cccllc.com/-- which was created in 1999, develops, manufactures and markets rigid plastic containers for many of the largest branded consumer products and beverage companies in the world. CCC has long-term customer relationships with many blue-chip companies including Dean Foods, DS Waters of America, The Kroger Company, Nestle Waters North America, National Dairy Holdings, The Procter & Gamble Company, Coca-Cola North America, Quaker Oats, Scotts and Colgate-Palmolive. CCC serves its customers with a wide range of manufacturing capabilities and services through a nationwide network of 61 strategically located manufacturing facilities and a research, development and engineering center. Additionally, the company has 4 international manufacturing facilities in Canada, Mexico and Puerto Rico.

Consolidated Container Company LLC's March 31, 2006, balance sheet showed $685.4 million in total assets and $769.9 million in total liabilities, resulting in a $84.5 million equity deficit.

COVENTRY HEALTH: Earns $135.5 Million in Quarter Ended June 30--------------------------------------------------------------Coventry Health Care, Inc., reported operating revenues of $1.94 billion for the quarter ended June 30, 2006, with net earnings of $135.5 million. Revenues were up 17.7% over the prior year quarter.

"We continue to be pleased with the results from our diverse businesses, including Medicare Part D," said Dale B. Wolf, chief executive officer of Coventry. "The strong cash flow from our businesses allows us to make investments to fuel future Company growth and to provide shareholder value through deployment of capital."

The Company recorded GAAP cash flows from operations of $170.8 million or 126% of net income in the quarter, with year-to-date cash flows from operations of $661.4 million or 258% of net income.

As of June 30, 2006, Coventry had total health plan membership of 2.54 million members. This represented an increase of 75,000 members over the prior year quarter driven by growth in commercial membership and a decrease of 8,000 members from the prior quarter driven primarily by losses in Medicaid membership resulting from the Missouri eligibility re-certification process impacting the Company in 2005 and the first half of 2006.

Commercial premium yields showed a favorable price-to-cost spread in the second quarter. Reported commercial yields rose to $258.43 PMPM (per member per month) in the quarter, an increase of 5.9% over the prior year quarter. Reported commercial medical expense was $199.43 PMPM in the quarter, an increase of 2.2% over the prior year quarter.

Health plan Net Premium Accounts Receivable of $91.2 million represent 5.3 days of sales outstanding. Health plan Days in Claims Payable for the quarter were 53.8, down 1.4 days from the prior quarter of 55.2 and down 0.9 days from the prior year quarter.

Coventry expects Total revenues of $1.90 billion to $1.95 billion for the 2006 third quarter with earnings per share on a diluted basis of $0.90 to $0.92. For the full year 2006, the Company expects:

-- Health plan membership growth toward the low end of the previously disclosed range of 1.0% to 3.0%;

Based in Bethesda, Maryland, Coventry Health Care, Inc.(NYSE: CVH) -- http://www.cvty.com/-- is a national managed health care company operating health plans, insurance companies,network rental/managed care and workers' compensation servicescompanies. Coventry provides a full range of risk and fee-basedmanaged care products and services, including HMO, PPO, POS,Medicare Advantage, Medicare Prescription Drug Plans, Medicaid,Workers' Compensation services and Network Rental to a broad crosssection of individuals, employer and government-funded groups,government agencies, and other insurance carriers andadministrators in all 50 states as well as the District ofColumbia and Puerto Rico.

In December 2004, Moody's assigned the Company's bank loan debt,senior unsecured debt and long-term corporate family ratings atBa1 with a stable outlook.

CUMULUS MEDIA: Earns $4.6 Million in Quarter Ended June 30----------------------------------------------------------Cumulus Media Inc.'s net revenues for the second quarter ended June 30, 2006, decreased slightly from $87.4 million in 2005 to $87.3 million, a 0.1% decrease, resulting from the contribution the Company's Houston and Kansas City stations to its affiliate, Cumulus Media Partners, LLC, on May 3, 2006.

The Company earned $4,696,000 for the 2006 second quarter, in contrast to a $4,974,000 net loss for the same period in 2005.

Station operating expenses increased from $54.7 million to $55.2 million, an increase of 0.8% from the second quarter of 2005, the result of general expense increases across the Company's station platform. Station operating income decreased from $32.7 million to $32.2 million in the second quarter of 2006, a decrease of 1.7% from the second quarter of 2005.

On a pro forma basis, which excludes the May-June 2005 results of the stations contributed to CMP, net revenues for the three months ended June 30, 2006 increased $1.4 million to $87.3 million, an increase of 1.6% from the same period in 2005, due to organic growth across the station platform. Pro forma station operating income decreased 1.9% from the same period in 2005, the result of general expense increases across the station platform.

In June, 2006, the Company successfully completed a self-tender offer and purchased 11.5 million shares of its outstanding Class A Common Stock at a price per share of $11.50, for approximately $132.3 million. In conjunction with the tender offer, the Company purchased 5 million shares of Class B Common Stock from affiliates f Banc of America at a price of $11.50 per share, or approximately $57.5 million. In addition, during July, 2006, pursuant to a previously announced Board-approved share repurchase program, the Company bought 327,500 shares on the open market. As of July 31, 2006, 43,150,857 shares of common stock were outstanding.

New $850 Million Credit Facility

Cumulus Media entered into a new $850 million credit facility on June 7, 2006. The new facility provides for a $100 million six-year revolving credit facility and a seven-year $750 million term loan facility in the aggregate principal amount of $750 million.

The proceeds were used by the Company to repay all amounts outstanding under its existing credit facilities of approximately $588.2 million and to purchase the shares of Class A Common Stock pursuant to the tender offer and Class B Common Stock pursuant to the agreement with the affiliates of Banc of America Capital Investors.

Susquehanna Radio Acquisition

On May 5, 2006, the Cumulus Media Partners LLC completed its acquisition of the radio broadcasting business of Susquehanna Pfaltzgraff Co. The purchase price was approximately $1.2 billion.

CMP is a private partnership created by the Company, Bain Capital Partners, The Blackstone Group and Thomas H. Lee Partners to acquire the radio broadcasting business of Susquehanna Pfaltzgraff.

Concurrent with the consummation of the acquisition, the Company entered into a management agreement with a subsidiary of CMP, pursuant to which the Company's management will manage the operations of CMP's subsidiaries. The agreement provides for the Company to receive a management fee that is expected to be approximately 1% of the subsidiaries' annual EBITDA or $4 million, whichever is greater.

About Cumulus Media

Based in Atlanta, Georgia, Cumulus Media Inc. (NASDAQ:CMLS) -- http://www.cumulus.com/-- is the second-largest radio company in the United States based on station count. Giving effect to the completion of all pending acquisitions and divestitures, Cumulus Media Inc., directly and through its investment in Cumulus Media Partners, will own and operate 343 radio stations in 67 U.S. media markets.

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As reported in the Troubled Company Reporter on May 26, 2006,Standard & Poor's Ratings Services lowered its ratings on CumulusMedia Inc., including lowering the corporate credit rating to 'B'from 'B+'. The ratings were removed from CreditWatch, where theywere placed with negative implications on May 11, 2006. Theoutlook is stable.

As reported in the Troubled Company Reporter on May 24, 2006,Moody's Investors Service downgraded Cumulus Media, Inc.'scorporate family rating to a Ba3 from a Ba2. Additionally,Moody's assigned Ba3 ratings to the company's $850 million inamended senior secured credit facilities.

DANA CORP: Sypris Wants Debtors to Decide on Two Purchase Pacts---------------------------------------------------------------Sypris Technologies Inc. asks the U.S. Bankruptcy Court for the Southern District of New York to compel Dana Corporation and its debtor-affiliates to assume or reject, on or before Oct. 3, 2006:

(a) an Asset Purchase Agreement relating to the Debtors' plant in Marion, Ohio, and an interrelated supply agreement; and

Pursuant to the Agreements, Sypris has raised and committed more than $100,000,000 in capital over the last five years primarily to:

* acquire assets under the Agreements, * modernize and repair the Plants and businesses, * substantially increase productive capacity, and * re-engineer the Plants into an integrated system.

An integral part of the Agreements was granting Sypris the exclusive right to supply 100% of Dana's North America requirements for more than 1,000 component part designs through 2014, Tracy L. Klestadt, Esq., at Klestadt & Winters, LLP, in New York, tells the Court.

Without the exclusive right to supply, Sypris would not have purchased the Debtors' non-competitive assets, Ms. Klestadt notes. The exclusive long-term right was the cornerstone of the Debtors' and Sypris' relationship.

According to Ms. Klestadt, the Agreements are by far the most significant transactions in Sypris' 22-year history and have transformed the company into one of the largest Tier 2 component suppliers to the North American heavy truck market. Dana represents more than $200,000,000 of Sypris' annual revenues. Sypris is Dana's largest component supplier and Dana is Sypris' largest customer, Ms. Klestadt avers.

As of Aug. 15, 2006, the Debtors have not yet decided whether to assume or reject the Agreements with Sypris.

Ms. Klestadt asserts that Sypris' request is warranted for these reasons:

(a) The sheer size of Sypris' productive capacity is important to the ongoing operation of the Debtors' estate. Sypris cannot continue to attract and retain the capital resources or the key employees it needs while its core business remains under a cloud of uncertainty. In turn, the Debtors' ability to satisfy its OEM customers would be harmed.

(b) The ongoing expenditures and costs that Sypris incurs to perform under the Agreements, including capital expenditures and the long-term union contracts, are quite significant;

(c) The Debtors have limited options as to the Agreements; and

(d) The Debtors continue to breach of the Agreements. Dana repudiate any further responsibility to conduct remediation activities in the Marion Plant when the Agreements require the Debtors to indemnify Sypris for ongoing environmental issues. The transfer of certain lines of business to Sypris has still not taken place.

The decision to assume or reject the Agreements will require very little analysis, and thus can be made easily by October 3, 2006, Ms. Klestadt states. Rejection of the Agreements will not benefit the Debtors' estate, Ms. Klestadt adds.

Ms. Klestadt notes that if rejected, the Agreements will allow Sypris to enjoin the Debtors from purchasing any of their requirements for certain commodities other than from Sypris through 2014. Thus, the customary benefits of rejecting a supply contract are unavailable.

Moreover, rejection of the Agreements would effectively require the Debtors to exit from the markets served by their commercial vehicle services division, among others, for lack of essential components, Ms. Klestadt adds.

"In essence, the only assessment required is whether the Debtors desire to stay in the heavy truck business," Ms. Klestadt says. Indeed, the Debtors can only reject the Agreements if it intends to stop using all of the Parts purchased from Sypris under the Agreements.

DANA CORP: Court Okays Pact Allowing PBGC to Consolidate Claims--------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New Yorkapproved a stipulation between Dana Corporation and its debtor-affiliates and Pension Benefit Guaranty Corporation allowingthe PBGC to file one or more consolidated proofs of claim in the Debtors' Chapter 11 Cases.

In the Stipulation, the parties also agreed that:

(a) the Stipulation is intended solely for the purpose of administrative convenience; and

(c) the Stipulation will apply to any amended proofs of claim that PBGC may file with respect to the Pension Plans.

As reported in the Troubled Company Reporter on Aug. 23, 2006,the Debtors sponsor 34 defined benefit pension plans covered by Title IV of the Employee Retirement Income Security Act of 1974.

PBGC administers the Debtors' defined pension plan termination insurance program under Title IV.

PBGC asserted that each of the Debtors may either be acontributing sponsor of one or more of the Pension Plans or amember of the contributing sponsor's controlled group.

PBGC also asserted that it is entitled to at least threeseparate claims regarding each Pension Plan for:

(a) unpaid minimum funding contributions required under Section 412 of the Internal Revenue Code and Sections 1082 and 1362 of the Labor Code;

(b) unpaid premiums owed to it; and

(c) contingent termination liability to it.

Each of the PBGC claims will be filed against each of theDebtors for joint and several liabilities. PBGC explained that if it were to separately file three proofs of claim with respect to each of the 34 Pension Plans against each of the 41 Debtors, PBGC would file a total 4,182 claims and that filing voluminous and duplicative claims would impose undue administrative burden on the Debtors, PBGC and the Debtors' claims agent.

DELTA AIR: Wilmington Trust Says it Holds $5 Mil. of Admin. Claim------------------------------------------------------------------Delta Air Lines, Inc., as lessee, and Wilmington Trust Company, as owner trustee, in connection with the leveraged lease of two MD-88 aircraft, bearing FAA Registration Nos. N972DL and N973DL, are parties to a Participation Agreement dated Sept. 1, 1991, as amended or supplemented, with:

-- UnionBanCal Leasing Corporation, as owner participant;

-- Trust Company Bank, as original loan participant;

-- NationsBank of Georgia, National Association, predecessor- in-interest to Bank of New York as indenture trustee;

-- NationsBank of South Carolina, National Association, as pass through trustee; and

-- First Security Bank of Idaho, as voting trustee.

Wilmington Trust informs the Court that it is asserting an administrative claim under Sections 503(b) and 507 of the Bankruptcy Code against the Debtors for, among others, expenses, claims, postpetition rent or ordinary charges and fees that may have been incurred or accrued pursuant to the Participation Agreement, statutory law, common law or otherwise.

Wilmington Trust informs the Court that as of August 21, 2006, it is still reviewing any and all postpetition claims it has against Delta to quantify the amount of its administrative claim against Delta of up to $5,000,000 in aggregate.

Wilmington Trust also asserts, without limitation, these additional claims:

(1) the right to assert and amend claims for administrative expenses of any nature;

(2) the right to assert and amend or supplement tax indemnity claims;

(3) interest, attorneys' fees and costs which continue to accrue and to be incurred;

(5) any other claims that it may have against the Debtors relating or incidental to their obligations;

(6) any claims that may arise pursuant to or as a result of the violation or breach of the surrender and return provisions as it concerns the aircraft contained in any and all of the operative documents; and

(7) any and all postpetition rent and ordinary use charges that may have been incurred or accrued.

DELTA AIR: Wants Court's Nod on J. Aron Fuel Supply Agreement-------------------------------------------------------------Delta Air Lines, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to authorize Delta Air Lines, Inc., and Epsilon Trading, Inc., to enter into a jet fuel supply agreement with J. Aron & Company.

Epsilon, a debtor-subsidiary of Delta, operates a jet fuel supply business. Epsilon purchases jet fuel from various suppliers and supplies the fuel to Delta and certain of its subsidiaries, as well as to unaffiliated Delta Connection Carriers and SkyTeam Partners. The supply operation requires the Debtors to maintain more than $100,000,000 in working capital at any given time, Marshall S. Huebner, Esq., at Davis Polk & Wardwell, in New York, relates.

The Debtors, according to Mr. Huebner, began assessing ways to preserve the benefits of their fuel strategy while reducing their working capital requirements. The Debtors invited several parties, including oil companies, fuel sellers and fuel traders, to submit proposals for the Debtors' consideration.

Based on their evaluation of the proposals, the Debtors determined that entering into an arrangement with Aron was the best of the available alternatives.

Pursuant to the Jet Fuel Supply Agreement, Aron agrees to purchase, at a prevailing market price that will result in aggregate proceeds of approximately $90,000,000 to $100,000,000,

(i) all of the Debtors' jet fuel held at certain specified storage facilities; and

(ii) certain rights to additional quantities of jet fuel for which Delta has prepaid.

Aron's purchase of the fuel will be free and clear of all liens, claims and encumbrances.

For the life of the Supply Agreement, Aron agrees to sell fuel to the Debtors at six airports in the United States:

-- accept temporary assignment of the Debtors' rights and obligations under various agreements with third-party fuel suppliers, and work with the suppliers to amend those agreements to the extent appropriate to allow Aron to purchase fuel supplied to the Debtors; and

-- accept temporary assignment of, and enter into amendments to, existing agreements and enter into new agreements with various pipeline and storage operators, in which Aron will be entitled to use fuel storage and pipeline capacity historically allocated to and used by the Debtors.

The Supply Agreement will be effective for an initial term of six months, and will be automatically extended for additional six-month terms up to a maximum of three years unless any party elects to exercise its option to terminate the Agreement.

Upon expiration or termination of the Supply Agreement, all fuel agreements, pipeline and supply agreements, inventory and infrastructure will revert to the Debtors, and a special termination payment in an amount equal to the value of the inventory purchased by the Debtors on the termination date will be payable to Aron, subject to certain adjustments.

Mr. Huebner discloses that the jet fuel Inventory and the Quantity Rights that Aron will purchase on the commencement date of the Supply Agreement are subject to a lien or security interest in favor of:

(i) the agent on behalf of the lenders to secure on a first- priority basis the Debtors' obligations under a General Electric Capital Corporation Credit Facility dated March 27, 2006, as amended, supplemented, restated or otherwise modified; and

(ii) American Express Travel Related Services Company, Inc., and certain of its affiliates to secure on a second- priority basis the Debtors' obligations under the Amex Credit Facility.

Prior to the commencement date of the Supply Agreement, the Debtors, according to Mr. Huebner, will obtain an amendment to the DIP Credit Facilities that will, inter alia, permit them to sell the Commencement Date Inventory and the Transition Quantity Rights. Pursuant to the terms of each DIP Credit Facility, the liens on the Commencement Date Inventory and the Transition Quantity Rights in favor of GE Capital, as agent, and Amex will be automatically released upon a permitted sale of the fuel.

The entry of into the Supply Agreement will reduce the Debtors' working capital requirements and will maintain a secure and ready supply of jet fuel at a competitive cost to the Debtors, Mr. Huebner tells Judge Hardin.

DELTA AIR: Unit Selects IBM for IT Infrastructure Services----------------------------------------------------------Delta Air Lines, Delta Technology, Delta's wholly-owned subsidiary, and IBM reported a seven year, Information Technology infrastructure services agreement to help support the airline's ongoing IT needs as it restructures its operations and progresses toward emergence from bankruptcy in the first half of 2007.

Under the agreement, IBM will partner with Delta Technology to provide Delta with comprehensive IT mainframe and mid-range services. By outsourcing the airline's IT infrastructure management, Delta will realize significant cost savings over the term of the agreement.

"Delta and Delta Technology are partnering with IBM to provide the airline with a flexible, responsive and cost-effective service delivery model," said Shirley Bridges, Chief Information Officer of Delta Air Lines. "IBM demonstrated that it has the industry knowledge and technical expertise to meet the demands of a major airline. By working together, we will achieve our goal to reduce costs on a long-term basis while ensuring a positive customer experience."

"Leading companies such as Delta are increasingly using strategic outsourcing to transform their IT infrastructure into an environment that enables both efficient cost management and a high standard of customer service and satisfaction," said Dwayne Ingram, Vice President Travel & Transportation, IBM Global Technology Services. "By working with IBM, Delta gains access to our extensive experience in the airline industry and can leverage state-of-the-art computing capabilities to bring innovative solutions to safely transport passengers and cargo."

Delta has sought bankruptcy court approval of the agreement.

About IBM

Headquartered in Armonk, New York, IBM Corp. (NYSE: IBM) -- http://www.ibm.com/-- is in the business of invention, development and manufacture of advanced information technologies, including computer systems, software, storage systems and microelectronics.

DEVELOPERS DIVERSIFIED: To Launch $250 Mil. Senior Notes Offering-----------------------------------------------------------------Developers Diversified Realty Corporation intends to offer, subject to market and other conditions, $250 million aggregate principal amount of convertible senior notes due 2011 through an offering to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended.

The notes will be convertible into cash up to their principal amount and Developers Diversified common shares in respect of the remainder, if any, of the conversion value in excess of such principal amount. The interest rate, conversion rate and other terms of the notes will be determined by negotiations between Developers Diversified and the initial purchasers of the notes. Developers Diversified expects to grant to the initial purchasers an option to purchase up to an additional $37.5 million aggregate principal amount of notes to cover over-allotments.

In connection with the offering, Developers Diversified expects to enter into a convertible note hedge transaction with an affiliate of an initial purchaser of the notes to substantially increase the effective conversion premium of the notes. This transaction is also intended to reduce the potential dilution upon future conversion of the notes. In connection with the transaction, the counterparty has advised Developers Diversified that it or its affiliates expect to enter into various derivative transactions with respect to Developers Diversified common shares simultaneously with or shortly after the pricing of the notes.

In addition, following pricing of the notes, the counterparty or its affiliates may enter into or unwind various derivatives and/or continue to purchase or sell Developers Diversified common shares in secondary market transactions, including during the observation period relating to any conversion of the notes.

Developers Diversified expects to use the net proceeds from the offering to repurchase approximately $50 million of its common shares, for the repayment of outstanding debt under its senior unsecured credit facility and for other general business purposes. Developers Diversified also expects to use a portion of the net proceeds from the offering to fund the cost of the convertible note hedge transaction.

Polk Audio principally develops, designs and markets a broad range of home and car speakers. The proposed acquisition will significantly increase Directed's home speaker market share and further diversify the company's product mix. The $136 million purchase price represents roughly a 7.5x multiple based on Polk's LTM June 2006 EBITDA. Concurrent with the closing of the acquisition, Directed's senior secured credit facility will be amended to provide for an additional $141 million term loan plus a doubling of the amount currently available under its revolving credit facility for seasonal borrowings to $100 million; the company will have more than $300 million in term loans outstanding following the acquisition.

The stable ratings outlook reflects Moody's expectation that sales will continue to increase and that operating margins will improve because of the greater product diversification and higher margin Polk business, while acknowledging the decreased level of financial flexibility and cushion as evidenced by the increase in leverage to about 4.5x and the decrease in interest coverage to just over 2x following the proposed acquisition using Moody's standard analytic adjustments.

The stable outlook also reflects the integration risks associated with the proposed merger, although we do not believe such risks are very significant as the company is currently not expecting many integration synergies. Moody's expects management to sustain its current strategic direction, which is centered on growing its core categories and distribution channels with further penetration of security and entertainment categories and continued growth of its Sirius satellite radio products.

Directed's ratings are constrained by its limited financial flexibility following the proposed Polk Audio acquisition coupled with growing uncertainty regarding discretionary consumer spending trends at this time. This limited financial flexibility could become more challenging as the company continues to invest in its various business initiatives. Moody's believes that expected working capital requirements will lead to a modest increase in leverage in the second half of 2006. In addition, the material weaknesses in internal controls over financial reporting are also factored into the ratings as is the company's high sales concentration with Circuit City and Best Buy.

Directed's ratings are supported by relatively strong operating margins and cash flow and by the expected growth and product diversification opportunities associated with Directed's exclusive supply agreement with SIRIUS satellite radio plus the greater anticipated market share in home and car speakers afforded by its proposed acquisition of Polk Audio.

The B1 rating on the amended senior secured credit facilities reflects its priority in the capital structure as supported by domestic subsidiary and parent company guarantees and collateral pledges comprising substantially all of the assets of the borrower and guarantors. Despite these benefits, the ratings on the facilities are at the same level as the corporate family rating due to minimal unsecured obligations that could provide a benefit to the secured creditors and the significant portion of the debt structure that is comprised by the senior secured asset class. The amended credit agreement contains financial covenants governing maximum total leverage, minimum fixed charge coverage, and maximum capital expenditures.

Directed Electronics, Inc., with corporate headquarters inVista, California, is a designer and marketer of consumer branded vehicle security and convenience systems and a supplier of audio, mobile audio and video and satellite radio products. The company's recognized brands, include Viper, Clifford, Python and Definitive Technology, which are sold through a diverse distribution network that includes over 3,200 retailers including Best Buy and Circuit City. Sales for the LTM ended June 2006 approximated $350 million.

DIVERSIFAX INC: May 31 Balance Sheet Upside-Down by $2.8 Million---------------------------------------------------------------- At May 31, 2006, Diversifax, Inc., reported total stockholders' deficit of $2,842,377 from total assets of $123,504 and total liabilities of $2,965,881.

The Company's balance sheet also showed strained liquidity with$91,770 in total current assets and $2,957,652 total current liabilities.

For the three months ended May 31, 2006, the Company reportednet income of $63,136 from total sales of $164,662.

A full-text copy of the Company's financial report for the three months ended May 31, 2006, is available for free at:

As reported in the Troubled Company Reporter on Apr. 21, 2006,Pender Newkirk & Company LLP expressed substantial doubt aboutDiversiFax, Inc.'s ability to continue as a going concern after it audited the Company's financial statements for the fiscal years ended Nov. 30, 2005 and 2004. The auditing firm pointed to the Company's $14 million accumulated deficit and negative working capital at Nov. 30, 2005. The Company also has significant indebtedness to an officer and shareholder.

DRESSER INC: Completes Consent Solicitation on 9-3/8% Term Loan---------------------------------------------------------------Dresser, Inc., received the requisite consents under its senior unsecured term loan to extend the deadlines for providing financial statements to dates consistent with the deadlines required by the indenture governing the company's 9-3/8% senior subordinated notes.

The deadline for providing the company's audited financial statements for the fiscal year ended Dec. 31, 2005, has been extended from Sept. 30, 2006, to Dec. 31, 2006, and for providing its 2006 quarterly financial statements from Sept. 30, 2006, to March 31, 2007.

The company is reportedly extending the date on which consents are due for its previously announced amendment process under its senior secured credit facility to 5:00 p.m. on Sept. 8, 2006, New York City time.

About Dresser

Based in Addison, Texas, Dresser, Inc. -- http://www.dresser.com/-- designs, manufactures and markets equipment and services soldprimarily to customers in the flow control, measurement systems,and compression and power systems segments of the energy industry. The Company has a comprehensive global presence, with over 8,500 employees and a sales presence in over 100 countries worldwide.

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As reported in the Troubled Company Reporter on Aug. 3, 2006,Moody's Investors Service downgraded Dresser, Inc.'s ratings.Moody's said the rating outlook is negative.

Dresser's Corporate Family Rating was downgraded to B1 from Ba3.The rating for the Company's Senior Secured Tranche C Term Loanmaturing 2009 was downgraded to B1 from Ba3. Moody's alsodowngraded the rating for the Company's Senior Unsecured Term Loan maturing 2010 to B2 from B1. The Company's Senior Subordinated Notes maturing 2011 was downgraded to B3 from B2.

EVERGREEN INT'L: Extends 12% Senior Notes Offering to Sept. 5-------------------------------------------------------------Evergreen International Aviation, Inc., an Oregon corporation, disclosed that its pending offer to purchase any and all of its outstanding 12% Senior Second Secured Notes Due 2010 (CUSIP No. 30024DAF7) scheduled to expire at 5:00 p.m., New York City time, on Aug. 21, 2006, has been extended until 5:00 p.m., New York City time, on Sept. 5, 2006, unless otherwise extended or earlier terminated. Except for the above change, all terms and conditions of the tender offer are unchanged and remain in full force and effect.

Holders of approximately 97.94% of the outstanding principal amount of the Notes have tendered and consented to the proposed amendments to the indenture governing the Notes. Subject to the satisfaction or waiver of the remaining conditions (including the consummation of a new Senior Secured Credit Facility by Evergreen) set forth in the Offer to Purchase and Consent Solicitation Statement dated July 20, 2006, Evergreen currently intends to accept the entire amount of Notes tendered pursuant to the tender offer and consent solicitation.

Credit Suisse Securities (USA) LLC is serving as the exclusive Dealer Manager and Solicitation Agent for the tender offer and consent solicitation. Questions regarding the terms of the tender offer or consent solicitation should be directed to:

The Tender Agent and Information Agent is D.F. King & Co., Inc. Any questions or requests for assistance or additional copies of documents may be directed to the Information Agent toll free at (800) 290-6426 (bankers and brokers call collect at (212) 269-5550).

Based in McMinnville, Oregon, Evergreen International Aviation, Inc. -- http://www.evergreenaviation.com/-- is a privately held global aviation services company that is active through several subsidiary companies.

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As reported in the Troubled Company Reporter on Aug. 11, 2006,Standard & Poor's Ratings Services raised its rating on EvergreenInternational Aviation Inc.'s first-lien bank loan rating to 'B+'from 'B' and changed the recovery rating to '1' from '2'. Therating action reflects a change in the structure of the proposedcredit facility.

FLYI INC: Judge Walrath Approves Incentive Program--------------------------------------------------The Hon. Mary F. Walrath of the U.S. Bankruptcy Court for the District of Delaware approves FLYi, Inc., and debtor-affiliates' Incentive Program. The Debtors are authorized to file the salaries and bonuses to be paid under the Employee Program Motion under seal.

The Court rules that with regards to all Remaining Employees other than Mr. Rick Kennedy:

(a) If the Debtors terminate a Remaining Employee without cause effective on or prior to October 31, 2006, the Bonus to which the Remaining Employee is entitled is equal to 150% of the base compensation that would have accrued for the employee from July 8, 2006, through and including October 31, 2006;

(b) If the Debtors terminate the Remaining Employee without cause effective after October 31, 2006, the Bonus to which the Remaining Employee is entitled is equal to his Four- Month Bonus plus a prorated Bonus based on the number of days he was employed starting on November 1, 2006, and ending on December 29, 2006.

If a Remaining Employee voluntarily terminates employment with the Debtors effective after October 31, 2006, the Employee will not be entitled to a Bonus other than the Four-Month Bonus;

(c) All Remaining Employees employed with the Debtors on October 31, 2006, will earn a Four Month Bonus on that date, and the Debtors are authorized to pay Four-Month Bonuses to the employees on or after October 31, 2006;

(d) If a Remaining Employee is not employed with the Debtors on October 31, 2006, other than as a result of a termination of employment by the Debtors without cause, or in the event of death, disability or medical or certain other approved leaves of absence, the Employee is not entitled to a Bonus;

(e) Remaining Employees will be provided at least two weeks' written notice of termination without cause. Otherwise, the Debtors will pay them for the two-week period;

(f) The Debtors retain the right to execute employment letters with Remaining Employees that provide that the expected employment term of the Remaining Employees is through a date prior to December 29, 2006.

If the termination date of employment described in the letter is prior to October 31, 2006:

(1) the Remaining Employee is only entitled to a prorated Bonus based on the employment term described in the letter; and

(2) the prorated Bonus is only payable if the Remaining Employee is employed with the Debtors as of the termination date or has been terminated prior to that time without cause.

As reported in the Troubled Company Reporter on Aug. 2, 2006, the Debtors asked the Court to approve an Incentive Program pursuant to Sections 105(a), 363(b) and 503 of the Bankruptcy Code. The Debtors had previously obtained the approval to implement aWind-Down Employee Plan. The Wind-Down Employee Plan, whichcommenced on January 5, 2006, expired on July 7, 2006.

FLYI INC: U.S. Trustee Wants Compliance on Section 345 Provisions-----------------------------------------------------------------Section 345 of the Bankruptcy Code provides for the protection of creditors and requires the debtor-in-possession to deposit or invest the money of the estate in a way that results in the "maximum reasonable net return."

As part of their first day motions, FLYi, Inc., and debtor-affiliates received a temporary waiver of the requirements of Section 345. Kelly Beaudin Stapleton, the U.S. Trustee for Region 3, notes that the waiver has expired.

The U.S. Trustee informs the U.S. Bankruptcy Court for the District of Delaware that despite repeated requests for the Debtors to comply with the Section 345 statute, they have failed to do so.

On the other hand, the Debtors respond that Wachovia Bank, NA, has not complied with their repeated requests to forward an original signed copy of a Collateralization Agreement to the Office of the U.S. Trustee.

The Bank maintains a bond with the U.S. Trustee for other cases filed in the district. As of August 11, 2006, the U.S. Trustee relates that the bond is $61 million. "[The bond] would adequately cover the Debtors' estates but for Wachovia's failure to execute a collateralization agreement applicable to these cases," the U.S. Trustee asserts.

Accordingly, the U.S. Trustee asks the Court to direct the Debtors to move their accounts that, at any time, may contain funds in an amount that exceeds $100,000, to an institution that will provide it with the required collateralization agreement.

FRASER PAPERS: Operating Losses Cues Moody's to Junk Ratings------------------------------------------------------------Moody's Investors Service lowered Fraser Papers Inc.'s corporate family rating to Caa1 and its senior unsecured rating to Caa2. The outlook was revised to stable from negative. At the same time the SGL-3 speculative grade liquidity rating was affirmed.

The revision in rating reflects the company's ongoing incurrence of operating losses and negative cash flow, and the uncertainty as to when these may improve given that the company has been unable to receive meaningful price increases or to benefit from those received. The rating also considers the possibility that the company will exercise its option to purchase the Katahdin mill, taking on more debt. The stable outlook reflects the fact that the company's cash on hand at June 30, 2006, was $49 million, equal to approximately 58% of its notes.

The Caa1 corporate family rating considers Fraser Papers' negative operating earnings and cash flow, high operating cost base, exposure to the Canadian dollar, very high underfunded pension obligation, small size and lack of diversity. The Caa1 rating does consider the company's reduced external debt burden, having used proceeds from asset sales to reduce its senior unsecured notes from $150 million to $84 million in the first half of the year. The $84 million of notes outstanding includes $16 million held by Fraser Papers.

Moody's last rating action on Fraser Papers was the lowering of the outlook to negative in October 2005.

Fraser Papers Inc., headquartered in Toronto, Ontario is engaged in the fine papers, pulp and lumber segments of the forest products industry and had sales of $918 million in 2005.

FRAWLEY CORP: June 30 Balance Sheet Upside-Down by $5 Million------------------------------------------------------------- At June 30, 2006, Frawley Corporation reported total stockholders' deficit of $5,007,000 from total assets of $501,000 and total liabilities of 5,508,000.

The Company's balance sheet at June 30 also showed strained liquidity with $28,000 in total current assets and $4,438,000in total current liabilities.

For the three months ended June 30, 2006, the Company incurred a net loss of $90,000 on net revenue of $2,000.

A full-text copy of the Company's financial report for the three months ended June 30, 2006 is available for free at:

Headquartered in Agoura Hills, California, Frawley Corporation develops real estate. The Company's real estate investment consists of approximately 52 acres of largely undeveloped land in the Santa Monica Mountains, northwest of Los Angeles. The Company is continuing to pursue various options with respect to selling a significant portion of its real estate.

GALVEX HOLDINGS: Wants Chapter 11 Cases Dismissed or Converted--------------------------------------------------------------Galvex Holdings Limited asks the U.S. Bankruptcy Court for the Southern District of New York to dismiss its chapter 11 case or, in the alternative, convert its case to a chapter 7 liquidation proceeding.

Lori R. Fife, Esq., at at Weil, Gotshal & Manges, LLP, relates that Galvex is "hopelessly" insolvent, has no assets remaining to reorganize or sell, and has no ability to file and confirm a plan of liquidation or pay any administrative expenses.

As reported in the Troubled Company Reporter on May 30, 2006, the Court authorized Galvex and its debtor-affiliates to sell substantially all of their assets to SPCP Group LLC. The purchase was effected in exchange for the discharge of the Debtors' $192 million debt to SPCP. SPCP acquired the shares of Galvex's subsidiaries:

-- Galvex Estonia; -- Galvex Intertrade; and -- Galvex Trade.

In accordance with the sale order, the Court further ruled that the Chapter 11 cases of the three debtor-subsidiaries will be dismissed effective upon the closing of the sale.

The Official Committee of Unsecured Creditors supports Galvex's request only to the extent that the Motion seeks conversion of the Debtor's case to a case under chapter 7 of the Bankruptcy Code.

The Court will consider the Debtor's conversion or dismissal request at a hearing scheduled today, Aug. 28, at 10:00 a.m.

About Galvex Holdings

Headquartered in New York City, New York, Galvex HoldingsLimited -- http://www.galvex.com/-- and its affiliates operate the largest independent galvanizing line in Europe. The Debtorshave offices in New York, Tallinn, Bermuda, Finland, Ukraine,Germany and the United Kingdom. The company and four of itsaffiliates filed for chapter 11 protection on Jan. 17, 2006(Bankr. S.D.N.Y. Lead Case No. 06-10082). Galvex Capital, LLC,is represented by David Neier, Esq., at Winston & Strawn LLP,and Gerard DiConza, Esq., at DiConza Law, P.C. Galvex HoldingsLtd. and the other debtor-affiliates are represented by DavidNeier, Esq., at Winston & Strawn LLP, and Lori R. Fife, Esq.,Marcia L. Goldstein, Esq., and Shai Waisman, Esq., at Weil,Gotshal & Manges, LLP. John P. McNicholas, Esq., and Thomas R.Califano, Esq., at DLA Piper Rudnick Gray Cary US LLP, representthe Official Committee of Unsecured Creditors. When the Debtorsfiled for protection from their creditors, they estimated assetsand debts of more than $100 million.

GENOIL INC: Appoints H. Lombard as Director of Corporate Finance----------------------------------------------------------------Hendrik Lombard, C.A., C.F.A, has been appointed as Controller and Director of Corporate Finance of Genoil Inc. For more than 10 years, Mr. Lombard has been involved in accounting and consolidations, corporate finance, cash management, international trade, mergers and acquisitions, portfolio management and internal control implementation.

Mr. Lombard will report to the Corporation's CFO and will manage Genoil's financial accounting processes and systems. Mr. Lombard will be responsible for the Corporation's financial reporting, its compliance with exchange listing requirements and audit preparation.

Mr. Lombard holds a Bachelor of Accounting degree from the University of Stellenbosch, South Africa, and an Honours B.Com. degree from the University of South Africa. Mr. Lombard obtained his Chartered Accountant designation from the SA Institute of Chartered Accountants in 1994 and from the Canadian Institute of Chartered Accountants in 2004, and also obtained his Chartered Financial Analyst designation in 2003. Mr. Lombard's background includes senior financial and management roles with entrepreneurial and established companies in the securities and other industries in Canada and Namibia.

Before joining Genoil, Mr. Lombard was a consultant providing financial reporting, taxation, accounting and auditing services. From 1998 to 2002, Mr. Lombard was Managing Partner at Lexus Securities, where he was instrumental in the start-up of this brokerage company. In this position Mr. Lombard developed a new money market system, implemented all accounting, settlement and compliance systems and directed research, portfolio management, corporate finance and trading. Prior to that, Mr. Lombard was Senior Executive at Namib Mills, the largest grain processing company in Namibia, Africa. Mr. Lombard started as Assistant to the CEO of this entity and was promoted to CFO after five months. While in the position of CFO, Mr. Lombard had a key role in the negotiations for the takeover and integration of Namib Mill's major competitor. He also directed Namib Mill's Finance, Personnel and IT departments, and designed and implemented new production, distribution and payroll systems for 550 employees. Mr. Lombard also served with KPMG early in his career and was in administrative positions at ABN Amro Bank and other mid-sized firms in the late 1990s.

In connection with Mr. Lombard's employment, the Company's Board has approved the granting of 250,000 options with an exercise price of CDN$0.73 per share that will vest over a four year period in pro rated annual increments from the date of issuance.

About Genoil Inc.

Headquartered in Calgary, ALberta, Genoil Inc. (TSX VENTURE: GNO)(OTCBB: GNOLF) -- http://www.genoil.net/-- is a technology development and engineering company providing environmentally sound solutions to the oil and gas industry through the use ofproprietary technologies. The Genoil Hydroconversion Upgrader isdesigned to economically convert heavy crude oil into morevaluable light upgraded crude, high in yields of transport fuels,while significantly reducing the sulfur, nitrogen and othercontaminants.

Going Concern Doubt

As reported in the Troubled Company Reporter on Aug. 18, 2006, BDO Dunwoody LLP expressed substantial doubt about Genoil Inc's ability to continue as a going concern after auditing the Company's financial statements for the year ended Dec. 31, 2005.The auditing firm pointed to the Company's working capital deficiency and accumulated losses.

GENTEK INC: Earns $4.2MM from Continuing Operations in 2nd Quarter------------------------------------------------------------------GenTek Inc. generated $223 million of revenues for the second quarter ended June 30, 2006, and operating profit of $16.8 million. This compares to revenues of $202.2 million and operating profit of $12.3 million in the prior-year period.

The Company's manufacturing and performance chemicals businesses both contributed to the 10% sales increase, of which 6% was due to increased copper prices. Both businesses contributed to the 36% increase in operating profit.

The Company recorded income from continuing operations of $4.2 million, compared to an income from continuing operations of $1.3 million in the second quarter of 2005.

For the six months ended June 30 2006, GenTek had revenues totaling $437.8 million and operating profit of $29.9 million. This compares to revenues of $402.4 million and operating profit of $17.2 million for 2005. The Company had income from continuing operations of $8.7 million in 2006, compared to income from continuing operations of $1.5 million in the comparable prior-year period.

The increase in revenues in 2006 is attributable to the growth in the performance chemical and the wire-harness businesses. Year over year operating profit improvement has been achieved in both performance chemicals and manufacturing, driven by margin improvements and reductions in selling, general and administrative expenses.

The Company had $11.9 million of cash and $337 million of debt outstanding as of June 30, 2006, and no borrowing outstanding under its revolving credit facility.

"We are pleased with our current operating momentum and look to build on this with our recently announced accretive acquisitions in General Chemical and GT Technologies" said William E. Redmond, Jr., GenTek's president and CEO.

GenTek Inc. -- http://www.gentek-global.com/-- provides specialty inorganic chemical products and services for treating water andwastewater, petroleum refining, and the manufacture of personal-care products, valve-train systems and components for automotiveengines and wire harnesses for large home appliance and automotivesuppliers. GenTek operates over 60 manufacturing facilities andtechnical centers and has approximately 6,900 employees

* * *

In February 2005, Moody's Investors Service placed a B2 rating on GenTek's $60 million senior secured revolving credit facility, due 2010, $235 million senior secured term loan B, due 2011.

GLOBAL CROSSING: Balance Sheet Upside-Down by $86MM in 2nd Quarter------------------------------------------------------------------Global Crossing Ltd.'s balance sheet at June 30, 2006, showed $1.87 billion in total assets and $1.95 billion in total liabilities, resulting in a stockholders' deficit of $86 million. The Company reported a $173 million stockholders' deficit on Dec. 31, 2005.

"We have performed for the past seven quarters leading to the achievement of our major goals, including generating positive adjusted EBITDA in June," said John Legere, Global Crossing's CEO. "After transforming the business and intentionally reducing revenues to focus on more profitable services such as IP-based carrier data and enterprise services, we're pleased to report that consolidated revenue grew sequentially for the first time in three years. This growth validates our strategy and shows that the future looks extremely promising for Global Crossing." Management reaffirmed that the company will begin to generate cash at some point in the second half of the year, marking significant financial milestones.

Global Crossing's consolidated revenue grew from $456 million in the first quarter of 2006 to $461 million in the second quarter of 2006.

Consolidated loss applicable to common shareholders was $77 million, compared with a loss of $109 million in the first quarter of 2006.

Global Crossing also reported customer successes during the second quarter, including a new contract with the U.S. General Services Administration, an inter-carrier agreement with Broadwing to expand their converged Internet Protocol offerings globally and a new agreement with Banco Santander International for IP convergence solutions. Responding to rapid growth in IP traffic, Global Crossing announced investments in its core network during the quarter. IP traffic grew 19 percent sequentially during the second quarter and 102 percent year over year.

Adjusted EBITDA improved 62 percent sequentially and was a loss of $17 million in the second quarter of 2006, compared with a loss of $45 million in the first quarter of 2006. Adjusted EBITDA excluding non-cash stock compensation was a loss of $10 million in the second quarter, compared with a loss of $33 million in the first quarter of 2006.

As of June 30, 2006, unrestricted cash and cash equivalents totaled $456 million. Restricted cash was $21 million. Excluding net cash impact from second quarter financings (including the purchase of U.S. treasury securities related to the offerings and interest received from such offerings), Global Crossing used$52 million of cash in the second quarter.

As required by the indenture governing its senior notes, GCUK offered approximately $26 million to tender a portion of the notes at par in the second quarter. There were no valid tenders of either the U.S. dollar- or British pounds sterling-denominated notes.

On May 10, 2006, the company signed a revolving credit facility with Bank of America in the face amount of $55 million, with an initial maximum availability of $35 million. Initial advances under the facility are subject to certain state regulatory approvals, which are expected by the beginning of the fourth quarter of 2006, and to customary closing conditions.

On May 30, 2006, Global Crossing closed two concurrent public offerings, generating $384 million in gross proceeds. The offerings included 12 million common shares for gross proceeds of $240 million and $144 million in senior convertible notes. After deducting underwriters' discounts and other direct fees expected to be paid by the end of 2006, net proceeds from the public offerings will be approximately $371 million. Approximately $20 million of the net proceeds was used to purchase a portfolio of U.S. treasury securities to fund the first six interest payments on such notes related to the offerings.

Headquartered in Florham Park, New Jersey, Global Crossing Ltd. -- http://www.globalcrossing.com/-- provides telecommunications solutions over the world's first integrated global IP-based network, which reaches 27 countries and more than 200 major cities around the globe. Global Crossing serves many of the world's largest corporations, providing a full range of managed data and voice products and services. The Company filed for chapter 11 protection on January 28, 2002 (Bankr. S.D.N.Y. Case No. 02-40188). When the Debtors filed for protection from their creditors, they listed $25,511,000,000 in total assets and $15,467,000,000 in total debts. Global Crossing emerged from chapter 11 on Dec. 9, 2003.

GLOBAL DOCUGRAPHIX: Court Approves Sale of Remaining Assets-----------------------------------------------------------The U.S. Bankruptcy Court for the Northern District of Texas approved the request of Global DocuGraphix, Inc., and Global DocuGraphix USA, Inc., to sell their remaining assets free and clear of liens.

As reported in the Troubled Company Reporter on Aug. 23, 2006,Michael P. Cooley, Esq., at Gardere Wynne Sewell LLP, in Dallas,Texas, reminded the Court that after an extensive marketing process and court-approved auction, the Court approved the sale of a substantial portion of the Debtors' assets to various buyers onAug. 1, 2006. In the aggregate, approximately $10.1 million in inventory, receivables, furniture, fixture and equipment and the capital stock of TopForm Software, Inc., were sold for total cash proceeds of approximately $9.1 million. All sales closed on Aug. 7, 2006.

To complete the orderly liquidation of the Debtors' estates, approximately $3 million in assets remain to be sold. These assets, excluding the stock of Document Imaging, Inc., dba GDX Data, include:

Class A-1 has paid in full. The $2.2 million class N is not rated by Fitch.

The downgrade is a result of an increase in Fitch expected losses on the six specially serviced loans. The upgrade is a result of defeasance and an increase subordination levels due to additional loan amortization and prepayments since Fitch's last review.

A total of 67 loans (27.5%) have defeased since issuance. As of the August 2006 distribution date, the transaction's principal balance decreased 23.2% to $1.94 billion compared to $2.53 billion at issuance. To date, the pool has realized losses in the amount of $16.8 million.

Fitch expects losses on the six specially serviced loans (1.6%) to deplete the principal balance of the non-rated class N and significantly impact the principal balance of class M. The largest of these loans (0.8%) is in foreclosure and is secured by a 420-unit multifamily property in West Des Moines, Iowa.

The second largest specially serviced asset (0.2%) is REO and is secured by a 467-pad mobile home property in Saginaw, Michigan. There are 220 vacant pads at the site which do not meet current code. The property manager is working on obtaining estimates for bringing the vacant pad sites up to code.

Fitch reviewed operating statement analysis reports and other performance information provided by the master servicer. The Fitch stressed debt service coverage ratio for the loan is calculated based on a Fitch adjusted net cash flow and a stressed debt service based on the current loan balance and a hypothetical mortgage constant.

Five credit assessed loans (27.2%) are in the pool. One loan, the Arden Realty Inc. loan (6.6%), has defeased since Fitch's last rating action.

The OPERS Factory Outlet Portfolio (9.1%) is secured by 12 cross-collateralized and cross defaulted outlet properties within nine centers. Occupancy remains stable at 94% as of December 2005, a 2.8% decrease from 96.7% at issuance. The year-end 2005 Fitch stressed debt service coverage ratio was 2.50x compared to 1.68x at issuance. The loan maintains an investment grade credit assessment.

The two remaining investment grade credit assessed loans, South Towne Center & Marketplace (3.3%) and Grove Property Trust (3.2%), have performed at or better than expected at issuance. The loans maintain investment grade credit assessments.

The Boykin Portfolio (4.9%) remains below investment grade.

GRUPO TMM: Inks $200MM Securitization Pact with Deutsche Bank-------------------------------------------------------------Grupo TMM, SA, a Mexican multi-modal transportation and logistics firm, and some of its subsidiaries have entered into an agreement for the securitization of $200 million with Deutsche Bank AG, London. The transaction was approved at Grupo TMM's Shareholders' Meeting on Aug. 18, 2006, and is subject to customary closing conditions, including but not limited to, no material adverse changes in market conditions or the financial situation of the company.

Once the closing conditions are met, Grupo TMM will use the proceeds from the transaction to refinance existing indebtedness and for capital investments in future projects.

Deutsche Bank, who acted as structuring agent of this facility, will provide funding for the transaction. The Bank of New Yorkwill be the trustee for the certificates issued under this facility.

Javier Segovia, the president of Grupo TMM, said, "This transaction not only extends our debt maturity, eliminating any refinancing risk in 2007, but also gives the company added financial flexibility and provides us with the resources to implement our business strategy."

Headquartered in Mexico City, Grupo TMM S.A. (NYSE: TMM)(MEXVALORIS: TMMA) -- http://www.grupotmm.com/-- is a Latin American multimodal transportation and logistics company. Through its branch offices and network of subsidiary companies, TMM provides a dynamic combination of ocean and land transportation services.

* * *

Standard & Poor's Ratings Services raised its corporate credit rating on Grupo TMM S.A. to 'B-' from 'CCC.' The rating was removed from Creditwatch, where it was placed on Dec. 15, 2004. S&P said the outlook is positive.

"The negative CreditWatch placement reflects our concerns regarding the scale of the transaction, the increase in debt levels, and the acquisition being a departure from the company's business experience both in terms of geography and operations," said Standard & Poor's credit analyst Jamie Koutsoukis.

"Debt levels will increase upon closing of the acquisition as it is expected to be funded 75% through debt; although the trust's financial profile will be considerably weaker than it was before the transaction, we expect Harvest Energy's financial profile will remain within the 'B+' category. The rating outcome is, however, dependent on our assessment of the change in the business profile as a result of the introduction of the refinery operations, as the refinery industry historically has been volatile," Ms. Koutsoukis added.

Standard & Poor's does not expect to resolve the CreditWatch placement until the transaction closes (which is projected to occur in October of this year) and the rating agency is able to fully assess the effect the refinery acquisition has on the trust's business and financial profile and its expectations for financial performance and credit metrics with the incorporation of the refinery into Harvest Energy's business.

HEMOSOL CORP: CCAA Proceedings Stayed Until September 29--------------------------------------------------------The Superior Court of Justice of Ontario issued an order extending the stay of proceedings against Hemosol Corp. and its affiliates Hemosol LP in Hemosol's Companies' Creditors Arrangement Act (Canada) proceedings until Sept. 29, 2006.

PricewaterhouseCoopers Inc., in its capacity as interim receiver of the assets, property and undertaking of Hemosol, brought a motion to the Court requesting additional time to allow for the waiver or satisfaction of the conditions contained in the plan sponsorship agreement entered into between the Receiver and 2092248 Ontario Inc. Additional time is also required as a result of the litigation proceedings in which the Receiver and the Plan Sponsor is engaged with ProMetic Bioscience Ltd., which are the subject of a sealing order of the Court. The proceedings relate to issues involving the license agreement between Hemosol and ProMetic. A trial of the issues is currently taking place and it is anticipated that the Court will issue its decision in the last week of August.

The Sponsorship Agreement continues to be conditional upon obtaining the approval of Hemosol's creditors and the Court on a proposed CCAA plan of compromise, and, unless waived by the Plan Sponsor, a plan of arrangement under the OBCA, which, if implemented, will result in a substantial dilution of the equity of Hemosol held by the shareholders existing at the time ofimplementation. Consequently, at this time there is no certainty as to the outcome of the marketing and sales process.

Hemosol Corp and Hemosol LP filed a Notice of Intention to Makea Proposal Pursuant to section 50.4 (1) of the Bankruptcy andInsolvency Act on Nov. 24, 2005. The Company had defaulted inthe payment of interest under its $20 million credit facility.Hemosol said that it would require additional capital tocontinue as a going concern and is in discussions with itssecured creditors with respect to its current financial position.On Dec. 5, 2005, PricewaterhouseCoopers Inc. was appointed interimreceiver of the Companies.

The Company disclosed, it used the proceeds from its new $200 million term loan to fund the redemption at the mandatory price of approximately $110.07 per $100 aggregate principal amount of Notes and to pay closing costs.

The Company has advised the Bank of New York of its election to redeem the Notes in connection with the refinancing of its former senior secured credit facility. The Company also disclosed that it expects to incur an after-tax one-time charge of approximately $14 million related to the refinancing, representing the call premium on the Notes and the write-off of unamortized deferred financing costs. The Company's new debt structure is comprised of a $300 million senior secured credit facility, consisting of a $200 million, seven-year term loan and a $100 million, six-year revolving credit facility.

The Company expects to realize the accretive benefit of the recapitalization beginning in the fourth quarter of 2006.

Herbalife Ltd. (NYSE: HLF) -- http://www.herbalife.com/-- is a global network marketing company that sells weight-management, nutritional supplements and personal care products intended to support a healthy lifestyle. Herbalife products are sold in 62 countries through a network of more than one million independent distributors. The company supports the Herbalife Family Foundation -- http://www.herbalifefamily.org/-- and its Casa Herbalife program to bring good nutrition to children.

HOLLINGER INT'L: June 30 Balance Sheet Upside-Down by $261 Mil.---------------------------------------------------------------Hollinger International Inc., nka Sun-Times Media Group, Inc., reported total assets of $964,667,000 and total liabilities of $1,225,784,000 at June 30, 2006, resulting in a stockholders' deficit of $261,117,000. The Company had reported a $197,737,000 equity deficit at March 31, 2006.

At June 30, 2006, working capital, excluding current debt obligations and restricted cash and escrow deposits and assets and liabilities of operations to be disposed of, was a deficiency of $347.7 million compared to a deficiency of $369.6 million at Dec. 31, 2005.

Earnings from continuing operations in the second quarter of 2006 amounted to $20.1 million, compared to a loss of $20.4 million in the second quarter of 2005. The improvement in earnings from continuing operations in the second quarter of 2006 as compared to 2005 is largely due to a $47.6 million improvement in income taxes largely due to the reversal of certain contingent tax liabilities no longer deemed necessary amounting to $43 million.

Excluding the impact of income taxes, the decrease in earnings from continuing operations for the quarter of $7 million is largely due to a decline in operating revenue of $10.3 million somewhat offset by lower costs of $4.6 million with respect to the Special Committee and its investigation and related litigation.

The loss from continuing operations for the six months ended June 30, 2006 was $6.4 million, compared with a loss of $40.9 million for the six months ended June 30, 2005.

Hollinger International Inc., nka Sun-Times Media Group, Inc --http://www.hollingerinternational.com/-- is a newspaper publisher whose assets include The Chicago Sun-Times and a large number of community newspapers in the Chicago area.

HOLLYWOOD THEATERS: Moody's Holds Low-B Ratings on Sr. Sec. Loans-----------------------------------------------------------------Moody's Investors Service affirmed the B2 corporate family rating and all other ratings of Hollywood Theaters, Inc., in light of the company's proposed bank amendment, which enhances flexibility under its bank covenants. The outlook remains stable.

A summary of ratings actions:

* Affirmed B2 Corporate Family Rating

* Affirmed B2 First Lien Senior Secured Bank Credit Facility Rating

* Affirmed B3 Second Lien Senior Secured Bank Credit Facility Rating

* Outlook: Stable

Hollywood's B2 corporate family rating continues to reflect its high financial risk, lack of scale, sensitivity to product from movie studios, and a weak industry growth profile. Financial risk includes leverage of 6.3 times debt-to-EBITDA, fixed charge coverage of 0.6 times, and modestly negative free cash flowfrom operations. Hollywood's growing base of better performing stadium theaters and limited competition in its midsize markets, coupled with Moody's expectations for a return to modestly positive free cash flow from operations in 2007 support the rating.

Although Hollywood has repeatedly underperformed its growth projections, some of the shortfall has come from a scaled back new build program and consequently lower capital expenditures. Hollywood has historically funded its expansion with cash generated from operations, as evidenced by the company's modest levels of positive free cash flow over the past several years. In 2006, Moody's expects Hollywood to consume a modest amount of cash after capital expenditures and to fund this shortfall with its $25 million revolver. Moody's anticipates Hollywood will return to its historic pattern and generate modestly positive free cash flow in 2007.

Hollywood Theater Holdings, Inc., is a regional theater exhibition company operating approximately 50 theaters and 500 screens located primarily in the southwest and on the west coast, with several joint ventures in the American territories in the South Pacific. The company maintains its headquarters in Portland, Oregon, and has annual revenue of approximately $120 million.

IMMUNE RESPONSE: Earns $104 Million in Quarter Ended June 30------------------------------------------------------------The Immune Response Corporation reported a $104,000,000 net income on 3,944,000 of net revenue for the three months ended June 30, 2006, in contrast to a $5,146,000 net loss on $3,572,000 of net revenue for the same period in 2005. The 2006 second quarter net income includes a $111,521,000 gain on warrant liability marked to fair value.

At June 30, 2006, the Company's balance sheet showed $11,481,000 in total assets and $24,289,000 in total liabilities, resulting in a $12,808,000 stockholders' deficit. As of June 30, 2006, the Company had an accumulated deficit of $149,142,000. At March 31, 2006, the Company reported a $134.7 million equity deficit.

As reported in the Troubled Company Reporter on June 8, 2006,Levitz, Zacks & Ciceric expressed substantial doubt about TheImmune Response's ability to continue as a going concern afterauditing the company's financial statements for the years endedDec. 31, 2005 and 2004. The auditing firm pointed to theCompany's stockholders' deficit and comprehensive loss for each ofthe years in the two-year period ended Dec. 31, 2005.

About Immune Response

Headquartered in Carlsbad, California, The Immune ResponseCorporation (OTCBB:IMNR) -- http://www.imnr.com/-- is an immuno-pharmaceutical company focused on developing products totreat autoimmune and infectious diseases. The Company's leadimmune-based therapeutic product candidates are NeuroVax(TM) forthe treatment of multiple sclerosis and IR103 for the treatment of Human Immunodeficiency Virus infection. Both of these therapies are in Phase II clinical development and are designed to stimulate pathogen-specific immune responses aimed at slowing or halting the rate of disease progression.

IMMUNE RESPONSE: Restating 2006 1st Quarter Financial Statements----------------------------------------------------------------The Immune Response Corporation will restate its first quarter financial statements to add approximately $100 million of phantom income, which has nothing to do with the Company's operations. Also, there will be additional phantom income of similar magnitude in the second quarter of 2006. These items do not reflect any change in the Company's results of operations or cash position, but are required under a recent clarification of Generally Accepted Accounting Principles.

The restatement relates to a requirement to reflect in first quarter income a fair market value adjustment for common shares underlying the warrants issued in the Company's 2006 private placement. The requirement arose because, when it issued those warrants, the Company did not have enough authorized common stock to honor exercises of the warrants. In determining the adjustment, the Company was required to estimate the fair market value of the Company's common stock on March 7, 2006, when most of the private placement securities were issued. On March 7, the closing market price of Company common stock was $0.24. The market, however, did not possess the information that the Company was issuing these many warrants (exercisable at $0.02 per share) and notes (convertible at $0.02 per share). When this information was publicly disclosed, the market price naturally fell; on March 8 and 9, the two days of trading after the public disclosure, the average closing price was $0.13.

The Company believed, and still believes, that if the market had known this information on March 7, the March 7 closing price would have been approximately $0.13, and that therefore the "true" fair market value on March 7 was $0.13 per share. The Company used the $0.13 figure in preparing its first quarter financial statements and reported, under a GAAP rule known as EITF No. 2000-19, a phantom gain of $12,300,000.

Under the new clarification, using the $0.24 figure is mandatory. Accordingly, the Company will restate its first quarter financial statements to show a phantom EITF No. 2000-19 gain of approximately $115 million rather than of $12.3 million.

On April 11, 2006, the Company increased its authorized number of shares of common stock to 3,500,000,000 and is now able to cover all warrant exercises.

Under a different aspect of EITF No. 2000-19, the Company will be required to report an additional phantom gain of approximately $111 million in its second quarter financial statements. Under the terms of a registration rights agreement the Company entered into as part of the 2006 private placement, if the Company defaulted under the agreement it might be required to pay damages in the form of stock - more stock, theoretically, than the Company's charter authorizes it to issue - if the investor chose to receive damages in the form of stock. This, together with the decline in the Company's stock value over the course of the second quarter, requires the additional phantom gain to be posted. Nonetheless, the Company is not in default under the registration rights agreement and does not anticipate any such default.

Immune Response CFO Michael Green said, "These are extreme examples of how GAAP sometimes fails to reflect companies' financial realities. We had wanted to apply EITF No. 2000-19 pragmatically to avoid showing such a strange amount of truly phantom income in the first quarter; that can only tend to confuse investors. However, the SEC has clarified that GAAP requires us to do exactly that, and so we will issue a restatement."

Mr. Green continued, "We emphasize to investors that there is no economic substance behind either the $115 million first quarter phantom gain or the $111 million phantom gain which we will report for the 2006 second quarter. We are a development-stage immuno-pharmaceutical company and our operations have never been profitable. Rational investors should pay no heed to the phantom gains, and should evaluate our Company only on its true scientific and business merits."

The filing of the Company's second quarter Form 10-Q will be delayed by a few days to enable it to be redrafted to reflect this matter and to enable the related amended first quarter Form 10-Q to be prepared.

About Immune Response

Headquartered in Carlsbad, California, The Immune ResponseCorporation (OTCBB:IMNR) -- http://www.imnr.com/-- is an immuno-pharmaceutical company focused on developing products totreat autoimmune and infectious diseases. The Company's leadimmune-based therapeutic product candidates are NeuroVax(TM) forthe treatment of multiple sclerosis (MS) and IR103 for thetreatment of Human Immunodeficiency Virus (HIV) infection. Bothof these therapies are in Phase II clinical development and aredesigned to stimulate pathogen-specific immune responses aimed atslowing or halting the rate of disease progression.

Going Concern Doubt

As reported in the Troubled Company Reporter on June 8, 2006,Levitz, Zacks & Ciceric expressed substantial doubt about TheImmune Response's ability to continue as a going concern afterauditing the company's financial statements for the years endedDec. 31, 2005 and 2004. The auditing firm pointed to theCompany's stockholders' deficit and comprehensive loss for each ofthe years in the two-year period ended Dec. 31, 2005.

INSIGHT COMMS: Earns $117.6 Million in 2006 Second Quarter----------------------------------------------------------Insight Communications Company reported a $117.6 million adjusted Operating Income before depreciation and amortization for the quarter ended June 30, 2006, a decrease of 4% over the second quarter of 2005.

Revenue for the three months ended June 30, 2006, totaled $311.7 million, an increase of 12% over the prior year, due primarily to customer gains in all services, as well as video rate increases.

High-speed Internet service revenue increased 27% over the prior year, which was attributable to an increased customer base and was partially offset by lower average revenue per customer due to promotional discounts. Insight added a net 19,700 high-speed Internet customers during the quarter to end at 534,500 customers.

Basic cable service revenue increased 7% due to an increased customer base and video rate increases, partially offset bypromotional discounts. Historically, Insight has experienced aseasonal decline in basic customers during the second quarter primarily as a result of students leaving the university communities Insight serves. In addition, digital service revenue increased 23% over the prior year due to an increased customer base. Insight added a net 11,700 digital customers during the quarter to end at 572,200 customers.

Average monthly revenue per basic customer was $79.65 for thethree months ended June 30, 2006, compared to $73.64 for the three months ended June 30, 2005. This primarily reflects the continuedgrowth of high-speed Internet and digital product offerings in allmarkets, as well as video rate increases.

"Our double-digit revenue growth and record second quarter RGU growth are a reflection of the successful investments we've been making in our sales, marketing and growth capabilities, " said Michael Willner, CEO. "Although our expenses and operating cash flow might seem to be out of line with our top-line growth, they indeed are right in line with our Q2 budget. We had some one-time credits last year, which resulted in OIBDA growth of 15% in Q2 2005, making a difficult year-over-year comparison. In addition, since the third quarter of last year, we have been building up our growth capability and operations in anticipation of an aggressive IP telephony launch, slated to begin next month. As a result, we are very comfortable that we will resume quarterly OIBDA growth in Q3 and will continue our strong RGU growth as telephony launches commence."

Cash provided by operations for the six months ended June 30, 2006 and 2005 was $133.3 million and $143.2 million. The decrease was primarily attributable to an increase in our net loss partially offset by the timing of cash receipts and payments related to the Company's working capital accounts.

Cash used in investing activities for the six months ended June 30, 2006 and 2005 was $141.8 million and $92.9 million. Cash used in financing activities for the six months ended June 31, 2006 and 2005 was $16.7 million and $41.8 million.

Insight believes that the Insight Midwest Holdings credit facility, cash on-hand and cash flow from operations are sufficient to support the company's current operating plan. Insight had the ability to draw upon $231.4 million of unused availability under the Insight Midwest Holdings credit facility as of June 30, 2006, to fund any shortfall resulting from the inability of Insight Midwest's cash from operations to fund its capital expenditures, meet its debt service requirements, including mandatory redemptions, or otherwise fund its operations.

Insight Communications (NASDAQ: ICCI) is the 9th largest cableoperator in the United States, serving approximately 1.3 millioncustomers in the four contiguous states of Illinois, Indiana,Ohio, and Kentucky. Insight specializes in offering bundled,state-of-the-art services in mid-sized communities, deliveringanalog and digital video, high-speed Internet, and voice telephonyin selected markets to its customers.

INTEGRATED HEALTH: Court OKs Stipulation on LaSalle's $556K Claim-----------------------------------------------------------------The U.S. Bankruptcy Court for the District of Delaware approved the stipulation between IHS Liquidating LLC and LaSalle Bank, N.A., formerly known as LaSalle National Bank.

As reported in the Troubled Company Reporter on July 12, 2006,LaSalle asserted Claim No. 13180 for $639,175 arising from Integrated Health Services, Inc., and its debtor-affiliates' rejection of a lease agreement between them.

The parties agreed that:

(1) the Claim will be allowed for $556,000 as a nonpriority general unsecured claim; and

(2) LaSalle will release all other claims or causes of action against IHS Liquidating, the Debtors and their estates.

INTERSTATE BAKERIES: Wants ABA Employers to Follow PBGC Ruling--------------------------------------------------------------Interstate Bakeries Corporation and its debtor-affiliates ask the U.S. Bankruptcy Court for the Western District of Missouri to:

(a) direct the ABA Plan and the Plan Trustees to administer and operate the Plan as a multiple employer plan in accordance with the PBGC Ruling;

(b) require the Participating Employers to follow the PBGC Ruling in their dealings with the ABA Plan, and calculate the ABA Plan Claim in accordance with the PBGC Ruling; and

The Verified Complaint seeks injunctive relief enforcing the final ruling issued by the PBGC.

Kettering Baking Company is a named defendant in the Verified Complaint because it supported the Debtors' contention that the ABA Plan is a multiple employer plan before the PBGC Ruling, Mr. Ivester says.

Mr. Ivester asserts that the Plan Trustees should:

-- be enjoined from continuing to assess the Plan under a single employer plan methodology;

-- withdraw prior assessments made on the single employer theory; and

-- revoke any plan to cut off benefit accruals for the Debtors' active participants as a result of non-payment based on the erroneous assessments.

Mr. Ivester tells the Court that the Plan's erroneous calculation of assessments and cessation of future benefit accruals by the Debtors' active Plan-participants would irreparably injure the Debtors. Indeed, a disruption of employees' pension benefits would cause major unrest for the Debtors' businesses at an integral stage in their reorganization proceedings.

The failure to implement the PBGC Ruling will make it much more difficult for the Debtors to formulate a go-forward reorganization plan, Mr. Ivester maintains.

Conversely, Mr. Ivester contends that the Defendants will suffer no harm if the Plan is operated as a multiple employer plan.

The ABA Plan Claim

The Debtors object to the ABA Plan Claim to the extent that:

(a) any portion of the claim is based on a characterization that the ABA Plan is an aggregate of single employer plans;

(b) the ABA Plan seeks minimum funding assessments from the Debtors that are based on the assumption that the Plan is an aggregate of single employer plans; and

(c) the ABA Plan seeks future contributions based on the assumption that the assumption that the Plan is an aggregate of single employer plans.

"The Court should adjudicate the ABA Plan Claim in manner consistent with the PBGC Ruling," Mr. Ivester reiterates.

The Debtors reserve their rights to amend their Objection and file additional objections to any proofs of claim that may be asserted against them.

Headquartered in Kansas City, Missouri, Interstate BakeriesCorporation is a wholesale baker and distributor of fresh bakedbread and sweet goods, under various national brand names,including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R),Merita(R) and Drake's(R). The Company employs approximately32,000 in 54 bakeries, more than 1,000 distribution centers and1,200 thrift stores throughout the U.S. The Company and seven ofits debtor-affiliates filed for chapter 11 protection onSeptember 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. EricIvester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate,Meagher & Flom LLP, represent the Debtors in their restructuringefforts. When the Debtors filed for protection from theircreditors, they listed $1,626,425,000 in total assets and$1,321,713,000 (excluding the $100,000,000 issue of 6.0% seniorsubordinated convertible notes due August 15, 2014 on August 12,2004) in total debts. (Interstate Bakeries Bankruptcy News, IssueNo. 46; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000)

INTERSTATE BAKERIES: Court Lifts Stay on Sara Lee Litigation------------------------------------------------------------Sara Lee Corporation, on behalf of its employee-participants in the American Bakers Association Retirement Plan, asserts that the Debtors are attempting to use the Pension Benefit Guaranty Corporation's lack of response as a pretext for effecting an improper and potentially indefinite stay of the Sara Lee litigation.

Mr. McClelland adds that the eventual PBGC determination will not resolve the subject matter of the Sara Lee Litigation, which is whether the ABA Plan and the Plan Trustees have violated the terms of the ABA Plan by improperly using Sara Lee's contributions to the ABA Plan trust to provide benefits for employee-participants of other participating employers.

Mr. McClelland asserts that if the PBGC grants the Debtors' request to revisit the existing administrative determination that the ABA Plan is an aggregate of single employer pension plans, Sara Lee will still be entitled to prosecute its litigation against the ABA Plan and the Plan Trustees to vindicate the statutory rights of its employee-participants under Section 502(a)(3) of the Employee Retirement Income Security Act of 1974 and adjudicate the issue whether the PBGC's new determination is correct.

Sara Lee employee-participants will continue to suffer prejudice so long as the ABA Plan and the Plan Trustees remain in breach of the terms of ABA Plan and the employee-participants are stayed from prosecuting their claims under ERISA, Mr. McClelland emphasizes.

Accordingly, Sara Lee asks the Court to deny the Debtors' request for further delay and the Debtors' request to enjoin the continued prosecution of the Sara Lee Litigation.

Debtors Talk Back

The Debtors inform the Court that the PBGC issued a ruling on Aug. 8, 2006, finding, among others, that the ABA Plan is a multiple employer plan and not, as contended by Sara Lee and the ABA Plan, an aggregate of single employer plans.

J. Eric Ivester, Esq., at Skadden Arps Slate Meagher & Flom LLP, in Chicago, Illinois, asserts that the PBGC Ruling effectively mooted the Sara Lee Litigation, as the proper determination of the ABA Plan is at the crux of the Sara Lee Litigation.

Mr. Ivester adds that the PBGC Ruling will provide more certainty regarding issues that will have a substantial impact on their reorganization process because the PBGC Ruling will allow them to resolve the ABA Plan.

Without clarity regarding the ABA Plan's status, the Debtors would have difficulty resolving the ABA Plan Claim, which is significant to both the overall claims-resolution process and the reorganization process, Mr. Ivester says. The determination that the ABA Plan is a multiple employer plan results in a $40,000,000 decrease in the Debtors' liabilities to the Plan.

In addition, Mr. Ivester says the PBGC Ruling is instrumental in determining the overall funding of the ABA Plan and the allocation of assets to Plan-participants of withdrawing employers like Sara Lee.

Based on the PBGC Ruling that the ABA Plan is a multiple employer plan, approximately $71,000,000 of the ABA Plan's assets is arguably allocable to Sara Lee's Plan-participants, an amount that the ABA Plan has already transferred to a stand-alone Sara Lee sponsored plan. Mr. Ivester says the amount is $27,000,000 less than the assets that would be allocable to Sara Lee's Plan-participants if the Plan were an aggregate of single employer plans.

Thus, the Debtors assert that all Participating Employers must also follow the PBGC Ruling.

Hence, the Debtors ask the Court to dismiss the Sara Lee Litigation.

Court Order

For reasons stated in open court, Judge Venters of the U.S. Bankruptcy Court for the Western District of Missouri denies Interstate Bakeries Corporation and its debtor-affiliates' request to enforce the automatic stay against the Sara Lee Litigation.

The Court notes that the Debtors have filed an adversary seeking injunctive relief against ABA Plan Trustees and Sara Lee, among others.

Accordingly, the Court terminates the interim order staying the Sara Lee Litigation.

Headquartered in Kansas City, Missouri, Interstate BakeriesCorporation is a wholesale baker and distributor of fresh bakedbread and sweet goods, under various national brand names,including Wonder(R), Hostess(R), Dolly Madison(R), Baker's Inn(R),Merita(R) and Drake's(R). The Company employs approximately32,000 in 54 bakeries, more than 1,000 distribution centers and1,200 thrift stores throughout the U.S. The Company and seven ofits debtor-affiliates filed for chapter 11 protection onSeptember 22, 2004 (Bankr. W.D. Mo. Case No. 04-45814). J. EricIvester, Esq., and Samuel S. Ory, Esq., at Skadden, Arps, Slate,Meagher & Flom LLP, represent the Debtors in their restructuringefforts. When the Debtors filed for protection from theircreditors, they listed $1,626,425,000 in total assets and$1,321,713,000 (excluding the $100,000,000 issue of 6.0% seniorsubordinated convertible notes due August 15, 2014 on August 12,2004) in total debts. (Interstate Bakeries Bankruptcy News, IssueNo. 46; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000)

ISTAR FINANIAL: Reports $90.4 Million Net Income in Second Quarter------------------------------------------------------------------iStar Financial Inc. generated $90.4 million of net income on $236.8 million of net revenues for the three months ended June 30, 2006, compared to $78.7 million of net income on $196.6 million of net revenues in 2005.

Net income allocable to common shareholders for the second quarter was $79.9 million compared to $68.2 million for the second quarter 2005.

Net investment income for the quarter was $111.3 million, compared to $95.2 million for the second quarter of 2005, primarily due to year-over-year growth of the Company's loan portfolio.

Included in this quarter's earnings was an early termination fee associated with a multi-asset lease within the Company's corporate tenant lease portfolio, which was partially offset by an impairment charge related to certain assets within the lease. The net effect was a one-time positive impact to earnings of $4 million, for the quarter.

The Company announced that during the second quarter, it closed 29 new financing commitments, for a total of $1.63 billion, up 57% year-over-year. Of that amount, $709 million was funded during the second quarter. In addition, the Company funded $140 million under pre-existing commitments and received $481 million in principal repayments. Additionally, the Company completed the sale of a non-core office and warehouse facility for $12.8 million net of costs, resulting in a net book gain of approximately $2.4 million. Cumulative repeat customer business totaled $9.9 billion at June 30, 2006.

For the quarter ended June 30, 2006, the Company generated return on average common book equity of 20.9%. The Company's debt to book equity plus accumulated depreciation/depletion and loan loss reserves, all as determined in accordance with GAAP, was 2.2x at quarter end.

As of June 30, 2006, the Company's weighted average GAAP yield on its structured finance assets and corporate tenant lease assets was 10.38% and 9.66%, respectively. The Company's net finance margin, calculated as the rate of return on assets less the cost of debt, was 3.38% for the quarter.

About iStar

iStar Financial (NYSE: SFI) -- http://www.istarfinancial.com/-- is the leading publicly traded finance company focused on the commercial real estate industry. The Company provides custom-tailored financing to high-end private and corporate owners of real estate nationwide, including senior and junior mortgage debt, senior and mezzanine corporate capital, and corporate net lease financing. The Company, which is taxed as a real estate investment trust, seeks to deliver a strong dividend and superior risk-adjusted returns on equity to shareholders by providing the highest quality financing solutions to its customers.

Fitch Ratings also raised the Company's preferred stock rating to 'BB+' from 'BB' in January 2006. Fitch said the Rating Outlook is Stable.

JACOBS INDUSTRIES: U.S. Trustee Wants Case Converted to Ch. 7-------------------------------------------------------------The U.S. Trustee of Region 9 asks the U.S. Bankruptcy Court for the Eastern District of Michigan to convert Jacobs Industries, Inc.'s chapter 11 case to a chapter 7 liquidation proceeding.

Claretta Evans, Esq., of the U.S. Trustee's Office, tells the Court that despite being notified of its duties under the U.S. Trustee's Operating Instructions and Reporting Requirements, the Debtor has not filed monthly profit and loss statements since it filed for bankruptcy and monthly affirmations of its ability to maintain proper insurance coverage on its assets, and pay taxes when they become due. Ms. Evans adds that the Debtor also failed to pay quarterly U.S. Trustee fees, which has now amounted to around $20,000.

According to Ms. Evans, the Debtor and the Official Committee of Unsecured Creditors do not have the ability to effectuate substantial consummation of the Second Amended Combined Liquidating Plan of Reorganization confirmed by the Court on July 5, 2006,

Headquartered in Fraser, Michigan, Jacobs Industries, Inc.,manufactures automotive interiors in roll forming and channel,stampings and assembled product. The company along with its threeaffiliates filed for chapter 11 protection on Sept. 26, 2005(Bankr. E.D. Mich. Case No. 05-72613). Charles J. Taunt, Esq.,and Erika D. Hart, Esq., at Charles J. Taunt & Associates,P.L.L.C., represents the Debtors in their restructuring. DeborahKovsky-Apap, Esq., at Pepper Hamilton LLP represents the OfficialCommittee of Unsecured Creditors. When the Debtor filed forprotection from its creditors, it listed $19,513,913 in totalassets and $21,413,576 in total debts.

The decision was handed down at a hearing in U. S. Bankruptcy Court, following an auction of the Larry's Market chain.

"I have always admired the McKinney family's supermarket story. The greater Seattle area was treated to a food retailer that was ahead of the rest of the country, and their dedication to bringing the best products to the market was second to none," Terry Halverson, Food Markets NW chief executive officer, said.

"They assembled a staff that provided a high level of service and enjoyed the food that they sold," Terry Halverson said. "We are excited to have this opportunity to serve Larry's loyal customer base, and plan to continue to offer the hard to find food products that they became known for, along with many new items from Metropolitan Market. We are also excited about the wonderful staff of foodies at Larry's and hope to add many of them to our team."

The current Metropolitan Market store on top of Queen Anne has a lease extension secured through early January 2008.

"It's an exciting time of growth for Metropolitan Market, and we're pleased to continue to serve the greater Queen Anne community and plan to operate both stores concurrently for the foreseeable future, offering a full-service Larry's Market for lower Queen Anne, Uptown, Denny, Belltown, South Lake Union, and Interbay neighborhoods," Terry Halverson said.

Headquartered in Kirkland, Washington, Larry's Markets, Inc.,-- http://www.larrysmarkets.com/-- operates several supermarkets and department stores in the U.S. Northwest. The company filed for chapter 11 protection on May 7, 2006 (Bankr. W.D. Wash. Case No. 06-11378). Armand J. Kornfeld, Esq., at Bush Strout & Kornfeld, represents the Debtor. The Official Committee of Unsecured Creditors has selected Marc L. Barreca, Esq., and Michael J. Gearin, Esq., at Preston Gates & Ellis LLP, to represent it in the Debtor's case. When the Debtor filed for protection from its creditors, it listed total assets of $12,574,695 and total debts of $21,489,800.

LE GOURMET: Sells Business to NACCO Industries' Subsidiary----------------------------------------------------------The Kitchen Collection, Inc., a subsidiary of NACCO Industries, Inc., will acquire the business of Le Gourmet Chef, Inc. The transaction is scheduled to close on or before Sept. 1, 2006.

Over the past several years, Kitchen Collection has indicated its intent to develop a new, more upscale store format, complementary to its Kitchen Collection format, for both outlet malls and traditional malls where Kitchen Collection currently has less of a presence. The addition of the Le Gourmet Chef stores, which offer a wide variety of gourmet foods, cookware, bakeware and home entertaining products, will complement Kitchen Collection's format and provide Kitchen Collection with increased flexibility to serve multiple customer segments across a wider range of retail environments, particularly the traditional mall environment.

About NACCO

Based in Cleveland, Ohio, NACCO Industries, Inc. (NYSE: NC) -- http://www.nacco.com/-- is an operating holding company with three principal businesses: lift trucks, housewares and mining. NACCO Materials Handling Group, Inc. designs, engineers, manufactures, sells, services and leases a comprehensive line of lift trucks and aftermarket parts marketed globally under the Hyster and Yale brand names. NACCO Housewares Group consists of Hamilton Beach/Proctor-Silex, Inc., a designer, marketer and distributor of small electric kitchen and household appliances, and commercial products for restaurants, bars and hotels, and The Kitchen Collection, Inc., a national specialty retailer of brand-name kitchenware, small electric appliances and related accessories. The North American Coal Corporation mines and markets lignite coal primarily as fuel for power generation and provides selected value-added mining services for other natural resources companies.

About Le Gourmet Chef

Headquartered in Shrewsbury, New Jersey, Le Gourmet Chef, Inc., --http://www.legourmetchef.com/-- is a retailer specializing in solutions for entertaining and gift giving. The Company filed forbankruptcy on Aug. 8, 2006 (Bankr. D. N.J. Case No. 06-17364). John DiIorio, Esq., at Shapiro & Croland, and Wendy G. Marcari,Esq., at Traub, Bonacquist, & Fox, LLP, represent the Debtor. When the Debtor filed for bankruptcy, the Debtor estimated itsassets and debts at $10 million to $50 million.

LIBERTY TAX III: June 30 Balance Sheet Upside-Down by $100 Mil.--------------------------------------------------------------- At June 30, 2006, Liberty Tax Credit Plus III L.P. reported total partners' deficit of $100,295,439 from total assets of $133,467,982 and total liabilities of $233,763,421.

For the three months ended June 30, 2006, the Company reported net income of $2,781,146 on total revenues of $5,225,736.

A full-text copy of the Company's financial report for the three months ended June 30, 2006 is available for free at:

Headquartered in New York City, Liberty Tax Credit Plus III L.P. is a limited partnership, which was formed under the laws of the State of Delaware on Nov. 17, 1988. Liberty Tax Credit's general partners are Related Credit Properties III L.P., a Delaware limited partnership, and Liberty GP III Inc., a Delaware corporation.

Liberty Tax Credit was formed to invest, as a limited partner, in other limited partnerships each of which owns one or more leveraged low-income multifamily residential complexes that are eligible for the low-income housing tax credit enacted in the Tax Reform Act of 1986, and some of which may also be eligible for the historic rehabilitation tax credit.

Some of the Apartment Complexes benefit from one or more otherforms of federal or state housing assistance. Liberty Tax Credit's investment in each Local Partnership represents from 27% to 98% of the partnership interests in the Local Partnership. Liberty Tax Credit does not anticipate making any additional investments. As of March 31, 2006, Liberty Tax Credit has disposed of nineteen of its 62 original properties.

LOS OSOS: Files Chapter 9 Petition to Protect Fiscal Integrity--------------------------------------------------------------The Los Osos Community Services District filed a Chapter 9 petition with the U.S. Bankruptcy Court for the Central District of California in Santa Barbara on August 25, 2006. Los Osos CSD filed for bankruptcy in order to give the District the opportunity to prepare a plan to resolve outstanding claims against the District so that creditors may be paid and the organization can continue to provide public services. The filing also gives the District broad discretion as to how to address existing debts and creditors.

The District has faced an onslaught of litigation and other legal actions intended to prevent the Board majority that was elected in a recall election nearly a year ago from moving a planned wastewater treatment plant out of the center of the Los Osos Community at a site commonly known as "Tri-W." The new board opposed the project for health, safety, aesthetic, environmental, economic and technical reasons, and supported a more holistic and sustainable water/wastewater out-of-town solution instead.

Taxpayers Watch, an organization led by some of the recalled members of the prior Board, filed numerous lawsuits against the District in an effort to overturn a voter approved initiative that makes it illegal to build the proposed wastewater treatment plant at the downtown Tri-W site. The litigation is now on appeal.

Taxpayers Watch also filed a petition with the Local Agency Formation Commission seeking dissolution of the District. The hearing for this petition has been continued to Sept. 21, 2006.

In addition to the Taxpayers Watch suits, the State Water Resources Control Board has made claims against the District. SWRCB cross-claimed against the District in a "breach of contract" claim, seeking a refund of $6.5 million that was disbursed for reimbursement of design costs and project contingencies. The $6.5 million was used instead to advance payments to contractors in a rush to start construction prior to the recall election.

Contractors for building the downtown Tri-W facility also made claims seeking payment for work completed and for projected loss of profits.

As a result of these actions, critical funds have been frozen by the court further crippling the District.

Other actions by the Regional Water Quality Control Board have resulted in administrative fines being imposed of more than $6 million and individual prosecution of citizens on a random basis in an effort to mandate costly bimonthly pumping of septic systems. Defense of the District's interest in these actions has been time consuming and costly.

Lisa Shicker, President of the Board, said, "This move is essential to protect the fiscal integrity of the Los Osos CSD and to assures continued local control over important public services. Given the repeated assaults by Taxpayers Watch and the unwillingness of the Water Board to work cooperatively with the District in addressing our mutual water quality concerns during this past year, the decision to file was inevitable and the district simply had no choice. We carefully considered all options before authorizing the filing, but this seemed like the responsible was to proceed. It will help stabilize our financial position and will give the district some sense of breathing room while a court approved plan is created to pay back creditors. It protects our other district operations and our employees.

Our most important goals continue to be delivering a basin-wide, sustainable water and wastewater project for the community as soon as possible, and to preserve the voice of our local government and community."

The Los Osos Community Services District -- http://www.losososcsd.org/-- was created on Nov. 3, 1998, when 87% of the registered voters within the District overwhelmingly supported formation. The District replaced the old County Service Area 9 with Los Osos' first public agency governed by community residents. District services include fire protection and emergency response, storm water drainage management, water supply for the Baywood area, parks and recreation, street lighting, and wastewater management.

Type of Business: The Los Osos Community Services District was created on Nov. 3, 1998, when 87% of the registered voters within the District overwhelmingly supported formation.

The District replaced the old County Service Area 9 with Los Osos' first public agency governed by community residents. District services include fire protection and emergency response, storm water drainage management, water supply for the Baywood area, parks and recreation, street lighting, and wastewater management. See http://www.losososcsd.org/

MASSEY ENERGY: Earns $3.2 Million in Second Quarter Ended June 30-----------------------------------------------------------------Massey Energy Company reported net income of $3.2 million compared to $37 million in 2005. The Company disclosed that produced coal revenues for its second quarter ended June 30, 2006, increased to $492.5 million from $487.1 million in the second quarter of 2005. EBITDA was $77.5 million in the second quarter of 2006 compared to $112.0 million in the second quarter of 2005.

The Company said that the second quarter volume and financial results continued to be impacted by the fire-related idling of the Aracoma longwall and the productivity performance that has challenged Massey's room and pillar deep mines for several quarters. "The good news is that the Aracoma longwall returned to production July 19th and is operating normally," said Don L. Blankenship, Massey Chairman and CEO. "I would like to personally thank all the management staff and hourly personnel who worked so tirelessly to return the Aracoma mine to production."

With the Aracoma longwall in operation again, the Company is taking a fresh look at all other mining operations. Massey has elected to idle four underground mining sections and to discontinue production at the Rockhouse longwall after it completes its current panel, in mid-August. The Company is also reducing staff and new miner training at a number of other higher cost mines to decrease costs at those operations.

"Central Appalachia coal mining has been, and continues to be, under significant cost pressure," said Mr. Blankenship. "Labor, productivity, environmental, and regulatory factors are increasingly difficult to forecast. We are disappointed that these pressures continue to impact our financial performance and we are determined to implement a variety of cost reduction initiatives."

Nevertheless, Massey continues to lead Central Appalachia in produced and shipped tonnage and reserve holdings and believes it continues to be the low cost producer. "Our focus continues to be on enhancing shareholder value," said Mr. Blankenship. "The restart of the Aracoma longwall and the start-up of the Twilight dragline, along with the other steps we are taking to control costs, should expand margins going forward."

Liquidity and Capital Resources

Massey ended the second quarter with available liquidity of $303.5 million, including $69.5 million available on its asset-based revolving credit facility and $234.0 million in cash. Total debt at the end of the quarter was $1,107.6 million compared to total debt of $1,113.3 million at Dec. 31, 2005.

Massey's total debt-to-book capitalization ratio increased to 61.1% at June 30, 2006 from 59.8% at Dec. 31, 2005. The capitalization ratio for Dec. 31, 2005, has been adjusted to reflect the impact of the non-cash adjustment to retained earnings required by the adoption of Emerging Issues Task Force Issue 04-6 on Jan. 1, 2006. After deducting available cash of $234.0 million and restricted cash of $105.0 million, which supports letters of credit, net debt totaled $768.6 million. Total net debt-to-book capitalization was 52.2% at June 30, 2006, compared to 48.0% at Dec. 31, 2005, as adjusted.

Capital expenditures, which totaled $85.3 million in the second quarter of 2006 compared to $111.8 million in the second quarter of 2005, were $161.6 million in the first half of 2006 versus $197.8 million in the first six months of 2005. Excluding estimated lease buyouts of $28 million, capital spending is expected to total between $260 and $270 million for 2006.

Depreciation, depletion and amortization (DD&A) was $57.2 million in the second quarter of 2006 compared to $60.5 million in the second quarter of 2005. For the year to date, DD&A totaled $113.9 million compared to $118.9 million for the first six months of 2005. DD&A is expected to total between $235 and $245 million for the full year 2006.

Based in Richmond, Virginia, Massey Energy Company (NYSE: MEE) -- http://www.masseyenergyco.com/-- produces Central Appalachian coal, with subsidiaries serving more than 125 utility, industrial and metallurgical customers around the world.

MICROISLET INC: Posts $5.9 Mil. Net Loss in Period Ended June 30----------------------------------------------------------------MicroIslet, Inc., filed its Quarterly Report on Form 10-QSB for the quarter ended June 30, 2006, with the Securities and Exchange Commission on Aug. 21, 2006.

The Company reported a net loss of $5.9 million for the first half of 2006 compared to a net loss of $3.9 million in the first half of 2005. Grant revenue was $154,000 and $295,000 for the three and six months ended June 30, 2006, respectively, and consisted entirely of research grants. No grant revenue was recognized for the first half of 2005.

Research and development expenses increased to $1.7 million in the second quarter of 2006 from $1.3 million in the second quarter of 2005, and increased to $3.6 million for the six months ended June 30, 2006, compared to $2.7 million for the same period in 2005. These increases were due to increased costs from our collaboration with the Mayo Foundation and UC Davis, an increase in headcount for lab personnel, increases in materials and services relating to testing of our technology in animals, and compensation expense from the new accounting treatment for stock-based compensation, SFAS 123(R), adopted by the Company on Jan. 1, 2006. General and administrative expenses increased to $1.1 million in the second quarter of 2006 from $600,000 in the second quarter of 2005 and increased to $2.7 million for the six months ended June 30, 2006, compared to $1.3 million for the same period in 2005. The increases were due to higher salaries and fees paid to senior management, fees for temporary consultants to fill open positions, higher-than-normal legal expenses, stock issuances to certain stockholders resulting from contractual liquidated damages owed them, and compensation expense from the new accounting treatment for stock-based compensation.

The Company undertook a review of its stock option award practices and has now concluded that management used incorrect accounting measurement dates for two stock option grants awarded in 2002 and 2003. The Company recorded the resulting adjustment in the current period as it determined the amount of the adjustment to be immaterial.

Going Concern Doubt

As reported in the Troubled Company Reporter on Aug. 1, 2006, Deloitte & Touche LLP, in San Diego, California, raised substantial doubt about MicroIslet 's ability to continue as a going concern after auditing the Company's consolidated financial statements for the year ended Dec. 31, 2005. The auditor pointed to the Company's incurred substantial operating losses and negative operating cash flows.

About MicroIslet

Headquartered in San Diego, California, MicroIslet, Inc. (AMEX:MII) -- http://www.microislet.com-- engages in Biotechnology research and development in the field of medicine for people with diabetes. MicroIslet's patented islet transplantation technology, licensed from Duke University, includes methods for cryopreservation and microencapsulation.

The Debtors objected to the Gregorys' Claims, but later withdrewtheir Objection.

On October 26, 2005, Mirant sought and obtained a Court orderlifting the automatic stay to allow liquidation of the Gregorys'Claims in a court of appropriate jurisdiction.

For the purpose of voting to accept or reject the Debtors' Planand for objecting to the Plan's confirmation, Judge Lynntemporarily allowed Claim No. 7994 as a general unsecured claimfor $21,000,000.

Pursuant to the Bankruptcy Court's Order, the Gregorys filed acivil lawsuit against the four Mirant Debtors in the U.S.District Court of the Southern District of Indiana.

While preparing service of process, the Gregorys were informed byJay Wilson, Mirant's registered agent, that service was notpermitted for Mirant Sugar Creek Ventures and Mirant Sugar CreekHoldings because the two entities were merged into MirantAmericas, Inc., and no longer exist. Mr. Wilson, instead,advised the Gregorys to amend the complaint against MirantAmericas.

The Gregorys responded that they do not have a claim againstMirant Americas, and they cannot simply amend their complaint.

Paul J. Castronovo, Esq., in Hoffman Estates, Illinois, explainsthat a motion to amend the Gregorys' civil complaint namingMirant Americas as a defendant, in its capacity as a successor-in-interest to Mirant Sugar Creek Ventures and Mirant Sugar CreekHoldings, must:

* be based on a Bankruptcy Court order; and

* not violate the Plan's discharge injunctions and Section 524(a)(2) of the Bankruptcy Code.

Mr. Castronovo asserts that the Debtors committed a fraudulentact by not disclosing the mergers, and breached the ConfirmationOrder. As a result, the Gregorys cannot liquidate their claimsagainst entities that no longer existed.

(b) direct the Reorganized Debtors' disbursing agent to make the distributions.

Mr. Castronovo says the Gregorys have obtained prima facie statusfor the validity of their Claims and amount of each Claim.

Headquartered in Atlanta, Georgia, Mirant Corporation (NYSE: MIR)-- http://www.mirant.com/-- is an energy company that produces and sells electricity in North America, the Caribbean, and thePhilippines. Mirant owns or leases more than 18,000 megawatts ofelectric generating capacity globally. Mirant Corporation filedfor chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03-46590), and emerged under the terms of a confirmed Second AmendedPlan on Jan. 3, 2006. Thomas E. Lauria, Esq., at White & CaseLLP, represented the Debtors in their successful restructuring.When the Debtors filed for protection from their creditors, theylisted $20,574,000,000 in assets and $11,401,000,000 in debts.The Debtors emerged from bankruptcy on Jan. 3, 2006. (MirantBankruptcy News, Issue No. 103; Bankruptcy Creditors' ServiceInc., http://bankrupt.com/newsstand/or 215/945-7000)

* * *

As reported in the Troubled Company Reporter on July 17, 2006,Moody's Investors Service downgraded the ratings of MirantCorporation and its subsidiaries Mirant North America, LLC andMirant Americas Generation, LLC. The Ba2 rating for Mirant Mid-Atlantic, LLC's secured pass through trust certificates wasaffirmed. The rating outlook is stable for Mirant, MNA, MAG, andMIRMA.

As reported in the Troubled Company Reporter on July 13, 2006,Fitch Ratings placed the ratings of Mirant Corp., including theIssuer Default Rating of 'B+', and its subsidiaries on RatingWatch Negative following its announced plans to buy back stock andsell its Philippine and Caribbean assets.

In May 2005, the New York Department of EnvironmentalConservation served an administrative Notice of Hearing andComplaint on Mirant Lovett and Mirant New York, Inc., regardingthe Lovett Coal Ash Facility.

The DEC has the authority to enforce New York's environmentallaws, and has jurisdiction over the operation and closure ofsolid waste management facilities.

The DEC Complaint alleged, among other things, that Mirant Lovettfailed to perform certain investigation and remediation orrestoration measures at the Lovett Coal Ash Facility incompliance with New York's Department of EnvironmentalConservation Rules and Regulations.

Based on the allegations in the DEC Complaint, Mirant Lovettestimated that the cost of compliance with Title 6 Part 360 ofthe New York Conservation Rules and Regulations will be more than$1,000,000.

Additionally, the DEC may impose certain penalties for violationof the NYCRR of up to $7,500 plus $1,500 per day, for eachviolation of any rule or regulation promulgated or order issued.The DEC Complaint sought a $100,000 penalty against MirantLovett.

New York and the DEC filed administrative claims against the NewYork Debtors, including claims against Mirant Lovett inconnection with the Lovett Coal Ash Facility under Section 503(b)of the Bankruptcy Code.

In late May 2006, Mirant Lovett and the DEC entered into apreliminary Consent Order resolving the administrative expenseclaims asserted against the Lovett Coal Ash Facility.

The Honorable Michael D. Lynn of the approved the Order on Consent and Compliance Schedule entered into with the Department ofEnvironmental Conservation dated June 2, 2006.

A full-text copy of the Consent Order between Mirant Lovett andthe New York DEC is available for free at

(a) Mirant Lovett will pay a $20,000 penalty to the DEC. Upon payment of $5,000 of the $20,000, the requirement to pay the remaining $15,000 will be suspended if Mirant Lovett meets the terms of the Consent Order;

(b) The Consent Order will not constitute an admission of any violation alleged in the DEC Complaint or Consent Order;

(c) Mirant Lovett's compliance with the Consent Order releases and satisfies its obligations to the DEC under the Complaint and Consent Order. However, that compliance does not satisfy Mirant Lovett's prospective obligations to the DEC;

(d) In accordance with a DEC-approved schedule, Mirant Lovett will complete the construction or repair requirements of the "Cap Stabilization Plan" in accordance with the DEC's reasonable satisfaction; and

(e) The Compliance Schedule requires Mirant Lovett to, among others:

i. continue to hold $4,200,000 in an escrow account with Deutsche Bank Trust Company; and

Headquartered in Atlanta, Georgia, Mirant Corporation (NYSE: MIR)-- http://www.mirant.com/-- is an energy company that produces and sells electricity in North America, the Caribbean, and thePhilippines. Mirant owns or leases more than 18,000 megawatts ofelectric generating capacity globally. Mirant Corporation filedfor chapter 11 protection on July 14, 2003 (Bankr. N.D. Tex. 03-46590), and emerged under the terms of a confirmed Second AmendedPlan on Jan. 3, 2006. Thomas E. Lauria, Esq., at White & CaseLLP, represented the Debtors in their successful restructuring.When the Debtors filed for protection from their creditors, theylisted $20,574,000,000 in assets and $11,401,000,000 in debts.The Debtors emerged from bankruptcy on Jan. 3, 2006. (MirantBankruptcy News, Issue No. 103; Bankruptcy Creditors' ServiceInc., http://bankrupt.com/newsstand/or 215/945-7000)

* * *

As reported in the Troubled Company Reporter on July 17, 2006,Moody's Investors Service downgraded the ratings of MirantCorporation and its subsidiaries Mirant North America, LLC andMirant Americas Generation, LLC. The Ba2 rating for Mirant Mid-Atlantic, LLC's secured pass through trust certificates wasaffirmed. The rating outlook is stable for Mirant, MNA, MAG, andMIRMA.

As reported in the Troubled Company Reporter on July 13, 2006,Fitch Ratings placed the ratings of Mirant Corp., including theIssuer Default Rating of 'B+', and its subsidiaries on RatingWatch Negative following its announced plans to buy back stock andsell its Philippine and Caribbean assets.

NATIONAL ENERGY: Court Bars Adam Mirick from Filing Late Claim--------------------------------------------------------------The U.S. Bankruptcy Court for the Middle District of Maryland denied Adam Mirick's request to file a late claim against against National Energy & Gas Transmission Inc.

In a May 9, 2006 hearing, the Court ruled against Mr. Mirick's informal proof of claim theory as a matter of law and it adjourned the hearing to a later date to give Mr. Mirick another chance to adduce evidence in support of his motion.

As a condition to the adjournment, the Court required Mr. Mirick to pay NEGT for the fees and expenses of its counsel incurred in connection with its attendance at the May 9 hearing.

NEGT objected to the Claim contending that Mr. Mirick's counsel did not present any admissible evidence of any kind, notwithstanding that it is undisputed that the burden of demonstrating excusable neglect lies with Mr. Mirick.

NEGT also argued that by failing to meet the condition imposed by the Court, Mr. Mirick has forfeited the second chance the Court granted to him.

Mr. Mirick sought Court-authority to file late claim against NEGTcontending that his failure to timely file a proof of claim was aresult of excusable neglect.

Mr. Mirick told the Court that it was only after the Jan. 9, 2004bar date had expired that he became aware that the Chapter 11 cases of NEGT, and NEGT Energy Trading Holdings Corporation are consolidated, and of other facts, which prove that NEGT is directly liable to him for unpaid wages and compensation that he earned while working at ET Holdings.

Mr. Mirick further told the Court that he did not know the extent of NEGT's involvement in his employment by ET Holdings. However,evidenced revealed only in discovery supports that NEGT actuallycontrolled ET Holdings' employment and compensation decisions,serving as a "joint employer" as a matter of law.

Mr. Mirick worked as an energy trader at ET Holdings. He filed Claim No. 77 for $7,859,478 against ET Holdings on March 14, 2003, in connection with the termination of his employment.

About National Energy

Bethesda, MD-based PG&E National Energy Group Inc. nka National Energy & Gas Transmission Inc. -- http://www.pge.com/-- develops, builds, owns and operates electric generating and natural gas pipeline facilities and provides energy trading, marketing and risk-management services. The Company and six of its affiliates filed for Chapter 11 protection on July 8, 2003 (Bankr. D. Md. Case No. 03-30459). When the Company filed for protection from its creditors, it listed $7,613,000,000 in assets and $9,062,000,000 in debts. NEGT received bankruptcy court approval of its reorganization plan in May 2004, and emerged from bankruptcy on Oct. 29, 2004.

NEOPLAN USA: Organizational Meeting Set at 2:00 p.m. Tomorrow-------------------------------------------------------------The U.S. Trustee for Region 3 will hold an organizational meeting to appoint an official committee of unsecured creditors in Neoplan USA Corporation and its debtor-affiliates' chapter 11 cases at 2:00 p.m., on Aug. 29, 2006, at Room 5209, J. Caleb Boggs Federal Building, 844 King Street in Wilmington, Delaware.

The sole purpose of the meeting will be to form a committee orcommittees of unsecured creditors in the Debtors' cases. Themeeting is not the meeting of creditors pursuant to Section 341of the Bankruptcy Code. However, a representative of the Debtorswill attend and provide background information regarding thecases.

Creditors interested in serving on a Committee should completeand return to the U.S. Trustee a statement indicating theirwillingness to serve on an official committee.

Official creditors' committees, constituted under Section 1102 ofthe Bankruptcy Code, ordinarily consist of the seven largestcreditors who are willing to serve on a committee. In someChapter 11 cases, the U.S. Trustee is persuaded to appointmultiple creditors' committees.

Official creditors' committees have the right to employ legal andaccounting professionals and financial advisors, at the Debtors'expense. They may investigate the Debtors' business andfinancial affairs. Importantly, official committees serve asfiduciaries to the general population of creditors theyrepresent. Those committees will also attempt to negotiate theterms of a consensual Chapter 11 plan -- almost always subject tothe terms of strict confidentiality agreements with the Debtorsand other core parties-in-interest. If negotiations break down,the Committee may ask the Bankruptcy Court to replace managementwith an independent trustee. If the Committee concludes that thereorganization of the Debtors is impossible, the Committee willurge the Bankruptcy Court to convert the Chapter 11 cases to aliquidation proceeding.

NORTHWEST AIRLINES: Flight Attendants' Strike Temporarily Blocked-----------------------------------------------------------------A United States District Court judge temporarily blocked, on Aug. 25, 2006, a planned strike by Northwest flight attendants until he has time to review the case. Judge Victor Marrero said a decision could come as early as next week on whether to grant Northwest Airlines an injunction that would prevent the flight attendants, represented by the Association of Flight Attendants-CWA, from striking in response to the company's rejection of their collective bargaining agreement.

"Management and the courts can stall us, but they cannot defeat us," said Mollie Reiley, Interim Master Executive Council President. "Our crusade to protect our careers has only begun. We will continue to fight for Northwest flight attendants and all flight attendants who will walk in our footsteps."

On July 31, 2006, the company imposed terms outlined in a tentative agreement that was overwhelmingly rejected by the flight attendants months earlier. The terms consisted of over 40% reductions in salary and benefits and as much as 25% additional work hours. AFA-CWA issued the company notice of their intent to strike as early as August 25, 2006, at 9:01 pm CDT. Under the Railway Labor Act, any unilateral change in a contract triggers a right to strike. Following the strike notice, the company quickly filed for an injunction, but a federal bankruptcy court denied the motion earlier this month.

While the judge considers his ruling, Northwest flight attendants continue to count down for CHAOS(TM). CHAOS, or Create Havoc Around Our System(TM), is AFA-CWA's trademarked strategy of targeted work actions using random, unannounced strikes.

"We will continue to prepare ourselves and our members for CHAOS; this is NOT over," said Ms. Reiley. "Something is terribly wrong when a company that just made a quarterly operating profit of nearly $200 million continues to insist on the same cuts it demanded from flight attendants when it was losing money."

For over 60 years, the Association of Flight Attendants -- http://www.afanet.org/-- has been serving as the voice for flight attendants in the workplace, in the aviation industry, in the media and on Capitol Hill. More than 55,000 flight attendants at 20 airlines come together to form AFA-CWA, the world's largest flight attendant union. AFA is part of the 700,000-member strong Communications Workers of America, AFL-CIO.

About Northwest Airlines

Northwest Airlines Corp. (OTC: NWACQ) -- http://www.nwa.com/-- is the world's fourth largest airline with hubs at Detroit,Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, andapproximately 1,400 daily departures. Northwest is a member ofSkyTeam, an airline alliance that offers customers one of theworld's most extensive global networks. Northwest and its travelpartners serve more than 900 cities in excess of 160 countries onsix continents. The Company and 12 affiliates filed for chapter11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No.05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq.,at Cadwalader, Wickersham & Taft LLP in New York, and Mark C.Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP inWashington represent the Debtors in their restructuring efforts.The Official Committee of Unsecured Creditors has retained AkinGump Strauss Hauer & Feld LLP as its bankruptcy counsel in theDebtors' chapter 11 cases. When the Debtors filed for protectionfrom their creditors, they listed $14.4 billion in total assetsand $17.9 billion in total debts.

NORTHWEST AIRLINES: Comments on Judge Marrero's Strike Injunction-----------------------------------------------------------------The Honorable Victor Marrero of the United States District Court for the Southern District of New York granted, on Aug. 25, 2006, Northwest Airlines' request for a preliminary injunction to prevent a threatened strike or work action by the company's flight attendants, represented by the Association of Flight Attendants-CWA.

The judge's ruling prevents AFA from taking any work action against the company until the court rules on Northwest's appeal of Bankruptcy Court Judge Allan Gropper's denial of the airline's request for a preliminary injunction.

Commenting on Judge Marrero's decision, Doug Steenland, president and chief executive officer, said, "We are pleased with Judge Marrero's decision to grant the preliminary injunction. We remain committed to negotiating a consensual agreement with our flight attendants and hope to accomplish that goal in the near future."

"As always, we are committed to serving our customers professionally and transporting them to their destinations safely and reliably," Mr. Steenland added. "Customers can continue to book the airline with confidence."

Northwest and two unions representing its flight attendants have negotiated two tentative agreements. Last month, the flight attendants rejected a tentative contract agreement Northwest had negotiated with AFA that would have met the targeted $195 million in annual labor cost savings. AFA endorsed that tentative agreement and recommended its members vote in favor of it.

As a result of the contract rejection, and in accordance with a previous decision of the bankruptcy court, Northwest implemented contract terms and conditions for its flight attendants that met the required $195 million of annual labor cost savings for that group.

Northwest has reached agreements on permanent wage and benefit reduction agreements with the Air Line Pilots Association, the International Association of Machinists and Aerospace Workers, Aircraft Technical Support Association, the Transport Workers Union of America, and the Northwest Airlines Meteorologists Association. Two rounds of salaried and management employee pay and benefit cuts have also been instituted and the needed aircraft maintenance employee labor cost savings have been achieved, which allowed Northwest to meet its goal of achieving $1.4 billion in annual labor savings.

About Northwest Airlines

Northwest Airlines Corp. (OTC: NWACQ) -- http://www.nwa.com/-- is the world's fourth largest airline with hubs at Detroit,Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, andapproximately 1,400 daily departures. Northwest is a member ofSkyTeam, an airline alliance that offers customers one of theworld's most extensive global networks. Northwest and its travelpartners serve more than 900 cities in excess of 160 countries onsix continents. The Company and 12 affiliates filed for chapter11 protection on Sept. 14, 2005 (Bankr. S.D.N.Y. Lead Case No.05-17930). Bruce R. Zirinsky, Esq., and Gregory M. Petrick, Esq.,at Cadwalader, Wickersham & Taft LLP in New York, and Mark C.Ellenberg, Esq., at Cadwalader, Wickersham & Taft LLP inWashington represent the Debtors in their restructuring efforts.The Official Committee of Unsecured Creditors has retained AkinGump Strauss Hauer & Feld LLP as its bankruptcy counsel in theDebtors' chapter 11 cases. When the Debtors filed for protectionfrom their creditors, they listed $14.4 billion in total assetsand $17.9 billion in total debts.

OMNICARE INC: Moody's Holds Ba2 Corporate Family Rating-------------------------------------------------------Moody's Investor Service changed the rating outlook on Omnicare, Inc.'s debt to negative from stable. At the same time, Moody's affirmed all of the company's long-term debt ratings and Speculative Grade Liquidity rating at SGL-1.

(1) cash flow is expected to be significantly lower during 2006 due to the UnitedHealth Group lawsuit as well as higher working capital needs associated with the implementation of Medicare Part D benefits;

(2) the company has not repaid any debt associated with its 2005 acquisitions;

(3) two pending Medicaid program settlements will further reduce financial flexibility in the near term; and

(4) over the intermediate term, the company may be more vulnerable to a reduction in the level of its rebates because of disclosure requirements.

Omnicare's Ba2 corporate family rating reflects relatively high financial leverage associated with last year's acquisition of NeighborCare, as well as ongoing risks associated with the recent implementation of Medicare Part D drug benefits. The ratings also consider the company's scale and leading position in the sector, which should allow it to continue to enjoy greater leverage when negotiating with manufacturers as well as Prescription Drug Plans.

If it appears that improvements in cash flow will not materialize because of negative outcomes related to the United lawsuit or ongoing working capital demands, the ratings could be downgraded. Additional developments related to federal and state investigations or onerous disclosure requirements could also provide greater pressure on the ratings. Moody's believes that these trends could result in free cash flow to debt ratios that are sustained at current levels.

If working capital needs reverse as Part D administrative issues are resolved, the United dispute is settled in OCR's favor, and details regarding disclosure requirements appear to limit downside risk for OCR, the outlook could be changed to stable. Moody's expects that favorable resolution of these matters could result in free cash flow to debt ratios that can be sustained in the 12 to 15% range.

The affirmation of the SGL-1 rating reflects our view that OCR should still maintain strong liquidity over the near-term, due in part to the availability of an $800 million revolver. However, as a result of cash flow constraints and potential litigation settlements, the company's Speculative Grade Liquidity rating is more weakly positioned within the SGL-1 category.

Omnicare, Inc., headquartered in Covington, Kentucky, is the leading provider of institutional pharmacy services to the long term care sector.

PAPERCLIP SOFTWARE: June 30 Balance Sheet Upside-Down by $1.5 MM---------------------------------------------------------------- At June 30, 2006, Paperclip Software Inc. reported total stockholders' deficiency of $1,506,282 from total assets of $381,314 and total liabilities of $1,887,596.

The Company's balance sheet at June 30 also showed strained liquidity with $331,640 in total current assets and $998,924 in total current liabilities.

For the three months ended June 30 2006, the Company reportednet income of $28,922 from net sales of $443,175.

A full-text copy of the Company's financial report for the three months ended June 30, 2006 is available for free at:

Sobel & Co., LLC, expressed substantial doubt about PaperclipSoftware Inc.'s ability to continue as a going concern after itaudited the Company's financial statements for the years endedDec. 31, 2005 and 2004. The auditing firm pointed to theCompany's significant losses from operations and working capitaldeficit of $202,000.

This is the first meeting of creditors required under Section 341(a) of the Bankruptcy Code in all bankruptcy cases.

All creditors are invited, but not required, to attend. ThisMeeting of Creditors offers the one opportunity in a bankruptcyproceeding for creditors to question a responsible officer of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors.

Total revenues in the second fiscal quarter of 2006 increased 3% to $458.9 million from $443.5 million in the prior year. The Company disclosed that the revenue growth was driven by a 13% increase in the Calvin Klein Licensing business, the continued strong performance of the Company's outlet retail business and wholesale sportswear business, particularly Calvin Klein men's better sportswear and Arrow.

The Company ended the quarter with $367.7 million in cash, an increase of $196.6 million compared with the prior year's second quarter. Its receivables and inventories were down 11% and 2%, respectively, below prior year levels. The Company's higher year over year cash position, coupled with higher investment rates of return, resulted in a 40% decrease in net interest expense for the current year's second quarter.

The Company also disclosed that its Series B preferred stockholders voluntarily converted, in May 2006, all of their remaining outstanding preferred stock into 11.6 million shares of common stock and sold 10.1 million shares of such common stock in a secondary offering. The transaction further strengthened the Company's balance sheet, eliminated the most expensive component of its capital structure and enhanced the liquidity of its common stock.

PIONEER NATURAL: To Pay $32 Mil. As Royalty Owner Suit Settlement-----------------------------------------------------------------Pioneer Natural Resources Company reached an agreement to settle claims made in the lawsuit John Steven Alford and Robert Larrabee, individually and on behalf of a Plaintiff Class v. Pioneer Natural Resources USA, Inc., which is pending in the 26th Judicial District Court, Stevens County, Kansas. The plaintiffs in this lawsuit are royalty owners in oil and gas properties located in the Hugoton field, which are owned by Pioneer's subsidiary, Pioneer Natural Resources USA, Inc. The plaintiffs sued a predecessor company to Pioneer USA asserting various claims relating to alleged improper deductions in the calculation of royalties.

Under the terms of the agreement, Pioneer USA will make cash payments to settle the plaintiffs' claims with respect to production occurring on and before Dec. 31, 2005. Pioneer USA also agreed to adjust the manner in which royalty payments to the class members will be calculated for production occurring on and after Jan. 1, 2006.

Pioneer's portion of the cash payment is expected to be approximately $32 million. The cash portion will be paid in two installments. Pioneer does not expect the settlement to impact net income for its quarter ended Sept. 30, 2006, because Pioneer has previously accrued sufficient contingency reserves associated with this case. In addition, the change in the calculation offuture royalty payments is not expected to have a material effect on Pioneer's liquidity, financial condition or future results of operations.

The settlement agreement is subject to customary conditions, including preliminary and final court approval.

Headquartered in Dallas, Texas, Pioneer Natural Resources Company (NYSE:PXD) -- http://www.pxd.com/-- is an independent oil and gas exploration and production company, with operations in the United States, Canada and Africa.

* * *

As reported in the Troubled Company Reporter on May 1, 2006,Fitch Ratings assigned a 'BB+' to Pioneer Natural Resources'$450 million issuance of 6.875% senior unsecured notes due 2018. Fitch currently rates Pioneer as Issuer Default Rating of 'BB+'; Senior unsecured debt rating of 'BB+'; and a Outlook Stable.

As reported in the Troubled Company Reporter on April 28, 2006, Moody's assigned a Ba1 rating to Pioneer Natural Resources'pending $450 million of 12-year senior unsecured notes andaffirmed its existing Ba1 corporate family. The rating outlookremains negative. Note proceeds would fund redemption of PXD's$350 million of 6.5% senior unsecured notes due 2008, repay bankrevolver borrowings, and for general corporate purposes.

PLASTECH ENGINEERED: Moody's Junks $50 Million Sr. Loan's Rating----------------------------------------------------------------Moody's Investors Service lowered the ratings of Plastech Engineered Products, Inc. -- Corporate Family, to B3 from B2; senior secured first-lien credit facilities to B3 from B2; senior secured second-lien term loan, to Caa1 from B3. The downgrade reflects the company's inability to maintain adequate coverage under the fixed charge ratio test as defined in its senior secured credit facilities, which has required the company to obtain a suspension of this covenant test.

* $50 million guaranteed senior secured second-lien term loan facility due March 2011, to Caa1 from B3

Plastech's last rating action was on Jan. 6, 2006 when the ratings were lowered.

While the suspension agreement has been approved by the required lenders of the senior secured credit facilities through Oct. 31, 2006, the future compliance with this covenant and access to liquidity remains uncertain given the current industry conditions. The continuing review of the company's ratings for possible downgrade considers that weak trends in the North American passenger vehicle market could pose further challenges to the company's operating performance and that a more permanent resolution to the covenant compliance will be needed for the company to maintain an adequate liquidity profile.

For the LTM period ending June 30, 2006 interest coverage was 1.3x and leverage measured by debt to EBITDA was approximately 4.6x. While LTM EBITDA has been stable compared the prior year-end, these metrics are consistent with a low speculative grade rating under Moody's rating methodology for auto parts suppliers. These credit metrics could come under additional pressure following Ford Motor Co. recent announcement of a 21% decline in production for the fourth quarter of 2006. Plastech's direct revenue exposure to Ford is approximately 28%. Plastech is evaluating transfer opportunities from certain customers to offset potential declines from lost production.

The review will consider the company's efforts to resolve the liquidity prospects which have resulted in the company's attaining a suspension of its fixed charge coverage covenant test. Moody's will also consider the impact of the recent Ford announcement of lower production for the fourth quarter of 2006, to the extent not offset by transfer sales opportunities, on Plastech's operating and liquidity position.

Factors that could result in lowered ratings include:

* further erosion of the company's liquidity profile;

* anticipated new business contracts not materializing in sufficient amounts to offset customer pricedowns;

* continued increases in raw materials prices which are not passed on to customers; and

* further volume shortfalls from current expectations.

Consideration for lower ratings would arise if any combination of these factors were to result in leverage of over 5x and further deterioration in EBIT coverage below 1x .

Factors that could contribute to a stabilized rating outlook include:

* further diversification of Plastech's revenue base which results in stabilized or improved operating margins;

* additional new business awards with solid margins sufficient to offset OEM pricedowns; and

* improvements in prospective liquidity.

Consideration for an improved rating outlook or upward rating migration would arise if any combination of these factors were to reduce leverage consistently under 4.5x or increased EBIT coverage consistently above 1.5x

Plastech Engineered Products, Inc., headquartered in Dearborn, Michigan, is a leading designer and manufacturer of primarily plastic automotive components and systems for OEM and Tier I customers. These components and systems incorporate injection-molded plastic parts, blow-molded plastic parts, and a small percentage of stamped metal components. They are used for interior, exterior and under-the-hood applications. Annual revenues approximate $1 billion.

PLATFORM LEARNING: Wants to Walk Away from Seven Property Leases----------------------------------------------------------------Platform Learning Inc. asks the U.S. Bankruptcy Court for the Southern District of New York for authority to:

In addition, the expendable property associated with the rejected premises is no longer valuable and beneficial to the Debtor's estate since the properties were primarily vacant.

The Debtor determines that the abandonment of the expendable property to the landlords of the properties' leases will be effective as of the effective date of rejection of the applicable lease.

About Platform Learning

Based in Broad Street, New York, Platform Learning Inc. --http://www.platformlearning.com/-- provides supplemental educational services through their Learn-to-Succeed tutoringprogram to students attending public schools that are "inneed of improvement." The Debtor works together with parents,schools, community organizations, and local educators to implementtheir research-based program, which ensures that all children canbecome successful students by providing appropriate support,motivation and curriculum tailored to their individual needs.

PREDIWAVE CORP: Has Until to November 10 to Decide on Leases------------------------------------------------------------The Honorable Randall J. Newsome of the U.S. Bankruptcy Court for the Northern District of California in Oakland extended, until Nov. 10, 2006, PrediWave Corporation's period to assume, assume and assign or reject six non-residential real property leases, pursuant to Section 365(d)(4) of the Bankruptcy Code.

The six leases are:

-- the Debtor's research & development and technology departments are housed in the largest of the four facilities, in Fremont, Calif.;

-- the Debtor's administrative department;

-- the Debtor's accounting department;

-- the Debtor's translation services department. The domestic leases are subject to separate lease agreements with different lessors. The total monthly rent under these domestic leases is approximately $22,300;

-- the Debtor's Japanese office has a $41,900 monthly rent obligation; and

-- the Debtor's facility in Canada, which houses 15 engineers, has a $5,250 monthly rent obligation.

As reported in the Troubled Company Reporter on July 13, 2006, the Debtor sought for the extension because its new management team and XRoads Solutions Group, LLC, have not had an opportunity to evaluate and analyze the economics underlying each lease, including whether those leases are necessary for the Debtor's current operations or future business plans.

Headquartered in Fremont, Calif., PrediWave Corporation --http://www.prediwave.com/-- provides cable and satellite operators with end-to-end digital broadcast platforms, and offersproducts like Video On Demand, Digital Video Recording,interactive video shopping, and subscription services. The Debtorfiled for chapter 11 protection on April 14, 2006 (Bankr. N.D.California Case No. 06-40547). Robert A. Klyman, Esq., at Latham& Watkins, LLP, and Jonathan S. Shenson, Esq., at Klee, Tuchin,Bogdanoff & Stern LLP represent the Debtor in its restructuringefforts. John D. Fiero, Esq., at Pachulski, Stang, Ziehl, Youngand Jones represents the Official Committee Of UnsecuredCreditors. The Debtor's Schedules of Assets and Liabilitiesshowed $145,282,246 in total assets and $773,033,371 in total liabilities.

PROFESSIONAL INVESTORS: Wants John P. Lewis as Bankruptcy Counsel-----------------------------------------------------------------Professional Investors Insurance Group, Inc., asks the U.S. Bankruptcy Court for the Northern District of Texas to employJohn P. Lewis, Jr., Esq., as bankruptcy counsel.

Mr. Lewis is expected to:

a) help in the preparation of schedules and statement of affairs and any amendments;

b) participate with the Debtor in its Section 341 meeting;

c) direct the Debtor concerning administrative and reorganization issues; and

d) perform all other necessary legal services in connection with these proceedings.

Mr. Lewis received a $16,000 retainer.

The Debtor says that Mr. Lewis will bill at $250 per hour for this engagement.

Mr. Lewis assured the Court that he does not hold any interest adverse to the Debtor, its creditors or the estate.

Headquartered in Plano, Texas, Professional Investors InsuranceGroup, Inc., filed for chapter 11 protection on Aug. 9, 2006 (Bankr. Case No. 06-33278). John P. Lewis, Jr., Esq., representsthe Debtor. No Official Committee of Unsecured Creditors hasbeen appointed in the Debtor's bankruptcy proceedings. Whenthe Debtor filed for protection from its creditors, it estimatedassets between $10 million and $50 million and debts between$1 million and $10 million.

R.F. CUNNINGHAM: Disclosure Statement Hearing Slated for Sept. 27-----------------------------------------------------------------The U.S. Bankruptcy Court for the Eastern District of New York will consider the adequacy of the Disclosure Statement explaining R.F. Cunningham & Company's Chapter 11 Joint Plan of Liquidation on Sept. 27, 2006.

The Debtor proposes to fund the Plan from the proceeds of the sale of substantially all of its assets

Holders of general unsecured claims will receive a pro rata share of what's left from the sale proceeds after administrative, Article 20 claims, secured claims and priority claims are fully paid. The Debtor estimates that unsecured creditors will aggregate $9,515,000.

Holders of Article 20 unsecured claims will receive a pro rata share of what's left from the sale proceeds after administrative, Article 20 claims, secured claims, priority claims and general unsecured claims are fully paid.

Holders of equity interests will get nothing.

A full-text copy of the Disclosure Statement is available for a fee at:

Headquartered in Smithtown, New York, R.F. Cunningham & Company,is a grain dealer, licensed under the Agriculture and Markets Lawof New York. The company filed for chapter 11 protection onJune 13, 2005 (Bankr. E.D.N.Y. Case No. 05-84105). Harold S.Berzow, Esq., at Ruskin Moscou Faltischek, P.C., represents theDebtor in its restructuring efforts. Alan D. Halperin, Esq., and Ethan D. Ganc, Esq., at Halperin Battaglia Raicht, LLP, represent the Official Committee Of Unsecured Creditors. When The Debtor filed for protection from its creditors, it listed $8,416,240 in total assets and $10,218,229 in total debts.

RADNOR HOLDINGS: Organizational Meeting Scheduled on Wednesday--------------------------------------------------------------The U.S. Trustee for Region 3 will hold an organizational meeting to appoint an official committee of unsecured creditors in Radnor Holdings Corporation and its debtor-affiliates' chapter 11 cases at 10:00 a.m., on Aug. 30, 2006, at Room 5209, J. Caleb Boggs Federal Building, 844 King Street in Wilmington, Delaware.

The sole purpose of the meeting will be to form a committee orcommittees of unsecured creditors in the Debtors' cases. Themeeting is not the meeting of creditors pursuant to Section 341of the Bankruptcy Code. However, a representative of the Debtorswill attend and provide background information regarding thecases.

Creditors interested in serving on a Committee should completeand return to the U.S. Trustee a statement indicating theirwillingness to serve on an official committee.

Official creditors' committees, constituted under Section 1102 ofthe Bankruptcy Code, ordinarily consist of the seven largestcreditors who are willing to serve on a committee. In someChapter 11 cases, the U.S. Trustee is persuaded to appointmultiple creditors' committees.

Official creditors' committees have the right to employ legal andaccounting professionals and financial advisors, at the Debtors'expense. They may investigate the Debtors' business andfinancial affairs. Importantly, official committees serve asfiduciaries to the general population of creditors theyrepresent. Those committees will also attempt to negotiate theterms of a consensual Chapter 11 plan -- almost always subject tothe terms of strict confidentiality agreements with the Debtorsand other core parties-in-interest. If negotiations break down,the Committee may ask the Bankruptcy Court to replace managementwith an independent trustee. If the Committee concludes that thereorganization of the Debtors is impossible, the Committee willurge the Bankruptcy Court to convert the Chapter 11 cases to aliquidation proceeding.

Headquartered in Radnor, Pennsylvania, Radnor Holdings Corporation -- http://www.radnorholdings.com/-- manufactures and distributes a broad line of disposable food service products in the United States, and specialty chemicals worldwide. The Debtor and its affiliates filed for chapter 11 protection on Aug. 21, 2006 (Bankr. D. Del. Case No. 06-10894). Gregg M. Galardi, Esq., and Mark L. Desgrosseilliers, Esq., at Skadden, Arps, Slate, Meagher, represent the Debtors. When the Debtors filed for protection from their creditors, they listed total assets of $361,454,000 and total debts of $325,300,000.

REFCO INC: Chapter 7 Trustee Authorized to Wind Down Refco Trading------------------------------------------------------------------The U.S. Bankruptcy Court for the Southern District of New York gave Albert Togut, the Chapter 7 trustee for Refco, LLC's estate, authority to complete a wind-down and dissolution of Refco Trading Services, LLC's business operations in accordance with Delaware laws.

As reported in the Troubled Company Reporter on Aug. 4, 2006, Refco Trading was formed in 2003 when Refco, Inc., acquiredUnited Kingdom-based MacFutures, a day-trading business engagingin commodity futures and options.

Refco Trading followed a similar model to MacFutures and becameRefco LLC's proprietary trading subsidiary. Most Refco Tradingemployees traded using accounts funded by Refco LLC, and only afew workers had any customer accounts.

Like the Refco Trading proprietary accounts, any third-party customer accounts were settled on a daily basis to the extent that the business day would rarely, if ever, end with Refco Trading having any open trade positions, Scott E. Ratner, Esq., at Togut, Segal & Segal LLP, in New York, relates.

Before the Petition Date, Refco Trading had over 100 employees and business operations in Montreal, Canada; Chicago, Illinois; and Miami, Florida. Refco Trading hired employees, trained them using a proprietary training system, and provided an account with which to trade. Most of the employees were paid a flat salary and traded on an account that was settled on a daily basis.

The traders also received profit percentages of successful trades as additional remuneration. Consistent with their Acquisition Agreement, Man Financial, Inc., has hired most or all of Refco Trading's former employees.

Refco Trading ceased all trading operations after the Petition Date.

Refco Trading currently holds approximately $1,600,000 in cash. The company's liabilities are uncertain, but Mr. Togut believes that there may be intercompany obligations. Refco Trading participated in an intercompany cash management system that paid the company's obligations to outside sources and repaid the obligations with intercompany receivables. Mr. Togut also believes that there may be liabilities to Canadian taxing authorities.

(a) preparation of accounting reports, statements of receipts and disbursements and income statements;

(b) preparation, signing, and filing of any tax returns in the United States or Canada;

(c) appearances before any governmental authority as may be necessary to effectuate a legal wind-down;

(d) adjudication and resolution of any claims asserted against Refco Trading and authorization for payment of any allowed claims from Refco Trading's assets to the extent required by law; and

(e) performing any other related tasks as may be necessary to effectuate a proper and legal wind-down and dissolution.

Mr. Togut also seeks to pay, without further Court order, all necessary costs and expenses incurred in connection with the wind-down, provided that any payments will be made from Refco Trading's assets, and not those of Refco LLC's estate.

According to Mr. Togut, Refco LLC's ownership interest in Refco Trading is an asset of its Chapter 7 estate. To the extent that Refco Trading is solvent, its remaining assets will inure to Refco LLC's benefit. Therefore, Refco Trading's wind-down and dissolution pursuant to Delaware laws is consistent with Mr.Togut's duty to "collect and reduce to money the property of the estate" under Section 704(a)(1) of the Bankruptcy Code.

Considering that the scope of Refco Trading's assets and liabilities are unknown, Mr. Togut insists that he must wind down Refco Trading to determine whether there are any residual assets that will flow to Refco LLC's estate.

About Refco Inc.

Based in New York, Refco Inc. -- http://www.refco.com/-- is a diversified financial services organization with operations in14 countries and an extensive global institutional and retailclient base. Refco's worldwide subsidiaries are members of principal U.S. and international exchanges, and are among the most active members of futures exchanges in Chicago, New York, London and Singapore. In addition to its futures brokerage activities, Refco is a major broker of cash market products, including foreign exchange, foreign exchange options, government securities, domestic and international equities, emerging market debt, and OTC financial and commodity products. Refco is one of the largest global clearing firms for derivatives.

The Company and 23 of its affiliates filed for chapter 11protection on Oct. 17, 2005 (Bankr. S.D.N.Y. Case No. 05-60006).J. Gregory Milmoe, Esq., at Skadden, Arps, Slate, Meagher & FlomLLP, represent the Debtors in their restructuring efforts. Luc A.Despins, Esq., at Milbank, Tweed, Hadley & McCloy LLP, representsthe Official Committee of Unsecured Creditors. Refco reported$16.5 billion in assets and $16.8 billion in debts to theBankruptcy Court on the first day of its chapter 11 cases.

REFCO INC: Chap. 7 Trustee Wants Court OK on Document Sharing Pact------------------------------------------------------------------Refco, Inc., and its debtor-affiliates and Man Financial Inc. entered into an acquisition agreement, dated as of November 13, 2005, and related buyer transition services agreement and seller transition services agreement, in connection with the sale of Refco, LLC's futures commission merchant business to Man.

The Court's orders authorizing the Debtors to enter into the Acquisition Agreement and the Transition Services Agreements establish obligations and procedures relating to Man and Albert Togut, the Chapter 7 trustee overseeing the liquidation of Refco LLC's estate, to obtain access to data, information and documents held by the other party relating to Refco LLC's business purchased by Man.

Since the closing of the Sale, both the Refco LLC Trustee and Man have followed the protocol established by the Transition Services Agreements, and have reached other informal protocols, to obtain access to data, information and documents held by the other party, and both parties anticipate that they will continue to need access for the foreseeable future.

The Transition Services Agreements are due to expire by their terms on Aug. 22, 2006 -- 270 days after the closing of the Sale on Nov. 25, 2005.

Mr. Togut and Man have negotiated a more permanent arrangement for the parties to gain access to data, information and documents in the possession of the other party after the expiration of the Transition Services Agreements, and to formalize the protocols under which the parties have been operating.

Mr. Togut seeks the Court's authority to enter into a facilities management agreement with Man.

The salient terms of the Facilities Management Agreement are:

(a) The Trustee will maintain documents and other information relating to Refco LLC's business prior to the Sale closing that were not part of the Acquired Assets and are in the possession or control of the Trustee, through the earlier of:

(i) the date the Court enters an order or final decree closing Refco LLC's case;

(ii) the date an Other Termination Event occurs; or

(iii) the date the Court enters an order otherwise terminating the parties' obligations under the Facilities Management Agreement;

(b) The Trustee will provide Man access to the Refco Records for:

(i) the purpose of Man responding to any Information Request directed to Man;

(ii) any other purpose reasonably related to Man's operation of the business and assets acquired from Refco LLC and its affiliates. The Trustee will retrieve and provide to Man electronically copies of Refco e-mail upon written request from Man.

(c) Man will maintain documents and other information relating to Refco LLC's business that were part of the Acquired Assets and are in the possession or control of Man through the Termination Date;

(d) Man will provide the Trustee access to the Man Records for purposes of the Trustee:

(i) responding to any Information Request directed to the Trustee or Refco LLC; or

(ii) otherwise accessing, reviewing, retrieving or photocopying Man Records as the Trustee determines is necessary; and

(e) Man will provide "Information Retrieval Services" to the Trustee to enable him to:

(i) respond to any Information Request directed to the Trustee or Refco LLC; or

Each party will bear its own costs in obtaining access to the party's Records. However, Refco LLC will reimburse Man for the costs arising from Man's employees or independent contractors performing Information Retrieval Services at the effective hourly rates of the employees or contractors performing those services.

Man will reimburse Refco LLC for costs arising from the Chapter 7 Debtor's employees retrieving and providing electronic copies to Man of Refco E-mail at the effective hourly rates of the employees performing those services.

Jerry L. Switzer, Esq., at Jenner & Block LLP, in Chicago, Illinois, explains that the Refco LLC Trustee will require access to the Records for purposes of responding to Information Requests served on the Trustee or Refco LLC, and otherwise administering the Chapter 7 Debtor's estate for the foreseeable future.

Mr. Switzer notes that Mr. Togut needs Man to perform the Information Retrieval Services because Refco LLC no longer has any employees, except to the limited extent that employees of the Chapter 11 Debtors are allocated on a part time basis to the Chapter 7 Debtor.

About Refco Inc.

Based in New York, Refco Inc. -- http://www.refco.com/-- is a diversified financial services organization with operations in14 countries and an extensive global institutional and retailclient base. Refco's worldwide subsidiaries are members ofprincipal U.S. and international exchanges, and are among the mostactive members of futures exchanges in Chicago, New York, Londonand Singapore. In addition to its futures brokerage activities,Refco is a major broker of cash market products, including foreignexchange, foreign exchange options, government securities,domestic and international equities, emerging market debt, and OTCfinancial and commodity products. Refco is one of the largestglobal clearing firms for derivatives.

The Company and 23 of its affiliates filed for chapter 11protection on Oct. 17, 2005 (Bankr. S.D.N.Y. Case No. 05-60006).J. Gregory Milmoe, Esq., at Skadden, Arps, Slate, Meagher & FlomLLP, represent the Debtors in their restructuring efforts. Luc A.Despins, Esq., at Milbank, Tweed, Hadley & McCloy LLP, representsthe Official Committee of Unsecured Creditors. Refco reported$16.5 billion in assets and $16.8 billion in debts to theBankruptcy Court on the first day of its chapter 11 cases.

REUNION INDUSTRIES: June 30 Equity Deficit Narrows to $19.7 Mil.----------------------------------------------------------------Reunion Industries, Inc., filed its financial statements for the first quarter ended June 30, 2006, with the Securities and Exchange Commission on Aug. 11, 2006.

For the three months ended June 30, 2006, the Company reported$3.324 million of net income on $14.800 million of revenues, compared with $252,000 of net income on $14.163 million of revenues for the same period in 2005.

At June 30, 2006, the Company's balance sheet showed $49.024 million in total assets, $68.555 million in total liabilities, and $196,000 in minority interest, resulting in a $19.727 million stockholders' deficit. The Company reported $27.517 million deficit at Dec. 31, 2005.

The Company's June 30 balance sheet also showed strained liquidity with $26.655 million in total current assets available to pay $64.621 million in total current liabilities coming due within the next 12 months.

Sale of Oneida

During the 2005 year, the Company decided to exit the plastics business. In January 2006, the Company signed an Asset Purchase Agreement to sell substantially all of the assets of its Oneida business to an unrelated entity.

On March 2, 2006, the Company completed the sale effective March 1, 2006, for a purchase price of $11,573,000 subject to a post-closing adjustment based on a closing balance sheet.

Of the net sale proceeds, after deducting $374,621 in related expenses, $300,000 was put into a one-year escrow as security for any claims by the buyer that may arise after the closing and is included in current assets at June 30, 2006, $2,000,000 was used to pay down a note payable to a private capital fund that is secured by the real estate of the Company, $980,974 was used to completely pay off the existing Wachovia term loan and the remaining $7,917,405 was used to pay down the revolving credit facility.

As a result, during the first quarter of 2006, the Company recognized a gain on sale of $4.3 million, net of related expenses of sale and estimated liabilities for future costs of $1.3 million.

Default Waiver

In connection with the sale of Oneida, the Company and Wachovia entered into an amendment to the loan and security agreement wherein Wachovia waived the October 2005 and November 2005 defaults for failure to meet the minimum monthly EBITDA amount, waived the then existing defaults arising from the Company's failure to make interest payments to the holders of the 13% Senior Notes prior to March 1, 2006, and lowered the monthly minimum EBITDA covenant requirement from $300,000 to $250,000 beginning in March 2006.

A private capital fund, holder of a $3.5 million note from the Company, also waived such cross defaults. As a result, as of March 31, 2006, the Company was not in default on its Wachovia or private capital fund debt. However, it was in default on such debt at June 30, 2006.

In addition to its prior payment defaults, the Company failed to make $700,000 quarterly interest payments on the Senior Notes that were due on April 1 and July 1, 2006.

As a result, another event of default has occurred under the Indenture under which the Senior Notes were issued. With an Indenture Default, holders of more than 25% of the principal amount of the Senior Notes may, by written notice to the Company and to the Trustee, declare the principal of and accrued but unpaid interest on all the Senior Notes to be immediately due and payable.

However, under an Intercreditor and Subordination Agreement entered into in December 2003 among Wachovia, the holders of the Senior Notes and certain other lenders, the Senior Note holders can not commence any action to enforce their liens on any collateral for a 180 day period beginning after the date of receipt by Wachovia, the senior secured lender, of a written notice from the Senior Note holders informing Wachovia of such Indenture Default and demandingacceleration.

At this date, neither the Company nor Wachovia has received written notice of any acceleration. Both the April 1 and July 1, 2006, defaults also constitute cross defaults under the Wachovia loan agreement and under the documents securing the $3.5 million loan from a private capital fund. The Senior Notes and all cross-defaulted debt are shown as debt in default at June 30, 2006, and Dec. 31, 2005.

Mahoney Cohen & Company, CPA, P.C., in New York, raisedsubstantial doubt about Reunion Industries' ability to continueas a going concern after auditing the Company's consolidatedfinancial statements for the years ended Dec. 31, 2005 and 2004.The auditor pointed to the Company's loss from continuingoperations, and working capital and stockholders' equitydeficiencies.

SAINT VINCENTS: Inks Sublease Agreement with Massey Knakal Realty-----------------------------------------------------------------Saint Vincents Catholic Medical Centers of New York and its debtor-affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to approve SVMC's entry into a sublease agreement with Massey Knakal Realty for nonresidential real property located at 447 86th Street, 2nd Floor in Brooklyn, New York.

The Debtors are selling a portion of the premises at which St. Mary's Hospital in Brooklyn had been located that includes Shevlin Hall, the current location of the administrative officeof SVCMC's home health care agency.

Andrew M. Troop, Esq., at Weil, Gotshal & Manges LLP, in NewYork, tells the Court that in light of the asset disposition, theDebtors must relocate various continuing services that willcontinue to operate after the sale closes, including the HomeCare Office.

After arm's-length negotiations, the Debtors reached an agreementin principle for the Sublease with Massey Knakal, as the Sub-Landlord, and HSBC Bank USA, the over-landlord for the Premises,pursuant to which:

* the Debtors will sublease approximately 4,000 square feet of office space for a 17-month term with a three-month early termination clause and an option to renew for an additional five-year period;

* rent will be $97,900 per year or about $8,150 per month plus utilities and real estate taxes; and

* no security deposit is required for the first 17-month term of the Sublease.

Mr. Troop explains that the Sublease should be authorized in allrespects for the reasons that:

(1) entry into the Sublease will facilitate the continuous and uninterrupted provision of home healthcare services;

(2) the Home Care Division contributes positively to the Debtors' financial performance and enhances its chances of reorganizing successfully;

(3) entry into the Sublease and relocation of the Home Care Office will facilitate the transfer of St. Mary's to its new owners, which is a precondition to closing on the sale of the St. Mary's Campus to Backer Group, LLC;

(4) the terms of the Sublease are reasonable and at or below market, especially in light of the renewal option and the option for early termination; and

(5) the Premises will provide better and newer working conditions for the Home Care Division's employees.

The Debtors have discussed the proposed Sublease with the Official Committee of Unsecured Creditors, and anticipate no objection from the creditors' panel.

Headquartered in New York, New York, Saint Vincents Catholic Medical Centers of New York -- http://www.svcmc.org/-- the largest Catholic healthcare providers in New York State, operate hospitals, health centers, nursing homes and a home health agency.The hospital group consists of seven hospitals located throughout Brooklyn, Queens, Manhattan, and Staten Island, along with four nursing homes and a home health care agency. The Company and six of its affiliates filed for chapter 11 protection on July 5, 2005 (Bankr. S.D.N.Y. Case No. 05-14945 through 05-14951). Gary Ravert, Esq., and Stephen B. Selbst, Esq., at McDermott Will &Emery, LLP, filed the Debtors' chapter 11 cases. On Sept. 12,2005, John J. Rapisardi, Esq., at Weil, Gotshal & Manges LLP tookover representing the Debtors in their restructuring efforts.Martin G. Bunin, Esq., at Thelen Reid & Priest LLP, represents theOfficial Committee of Unsecured Creditors.

SAINT VINCENTS: Moves to Reject Diagnostic Medical MRI Contract---------------------------------------------------------------Saint Vincents Catholic Medical Centers of New York and its debtor-affiliates want to walk away from their executory contract with Diagnostic Medical Consultants, Inc., effective as of July 1,2006. The Debtors believe that the contract with DMC is no longer beneficial to their estates.

Under the Contract, DMC is obligated to provide to SVCMC:

* a Modular MRI Unit for use at St. Vincent's Hospital, Staten Island; and

* a Mobile MRI Unit for use at Mary Immaculate Hospital, Queens.

DMC also provides various services in connection with Saint Vincent Catholic Medical Centers' use of the MRI Units. The term of the MRI Contract with respect to each MRI Unit is five years from the date a patient is first scanned on that MRI Unit.

For its part, SVCMC remits a minimum monthly payment of $96,000 to DMC for use of the MRI Units, Andrew M. Troop, Esq., at Weil, Gotshal & Manges LLP, in New York, relates.

Due to an increase in the number of competing facilities offering MRI services, the demand for in-patient and out-patient MRI examinations has declined. The amount managed care providers reimburse hospitals for performing MRI examinations has also continued to decrease.

As a result, the MRI Contract caused SVCMC to incur costs that significantly outweigh any benefits to the Debtors' estates. The Debtors have also recently sold Mary Immaculate and SVHSI as going concerns, and the purchasers have not identified the MRI Contract for assumption and assignment.

DMC objects to the Debtors' characterization of the contract to be rejected and any potential attempt to use the description in the Rejection Motion for ultimate claim resolution purposes.

Headquartered in New York, New York, Saint Vincents Catholic Medical Centers of New York -- http://www.svcmc.org/-- the largest Catholic healthcare providers in New York State, operate hospitals, health centers, nursing homes and a home health agency.The hospital group consists of seven hospitals located throughout Brooklyn, Queens, Manhattan, and Staten Island, along with four nursing homes and a home health care agency. The Company and six of its affiliates filed for chapter 11 protection on July 5, 2005 (Bankr. S.D.N.Y. Case No. 05-14945 through 05-14951). Gary Ravert, Esq., and Stephen B. Selbst, Esq., at McDermott Will &Emery, LLP, filed the Debtors' chapter 11 cases. On Sept. 12,2005, John J. Rapisardi, Esq., at Weil, Gotshal & Manges LLP tookover representing the Debtors in their restructuring efforts.Martin G. Bunin, Esq., at Thelen Reid & Priest LLP, represents theOfficial Committee of Unsecured Creditors.

SATCON TECH: Posts $3.4 Million Net Loss in Quarter Ended July 1---------------------------------------------------------------- For the three months ended July 1, 2006, Satcon Technology Corporation incurred a net loss of $3,486,455 from total revenue of $8,103,157.

Satcon's balance sheet at July 1, 2006 showed total assets of $22,937,827, total liabilities of $13,277,731 and total stockholders' equity of $9,660,096.

A full-text copy of the Company's financial report for the three months ended July 1, 2006, is available for free at:

As reported in the Troubled Company Reporter on Jan. 9, 2006,Grant Thornton LLP expressed substantial doubt about SatConTechnology Corporation's ability to continue as a going concernafter it audited the Company's financial statements for the fiscal years ended Sept. 30, 2005 and 2004.

Grant Thornton pointed to the Company's recurring losses fromoperations. In addition, the auditing firm noted the Company'sneed to comply with certain restrictive covenants related to aline of credit agreement.

SATELITES MEXICANOS: Seeks Bankr. Court Nod to Pay Taxes and Fees-----------------------------------------------------------------Satelites Mexicanos, S.A. de C.V., seeks authority from the U.S. Bankruptcy Court for the Southern District of New York, to pay the taxes and regulatory fees as and when they become due in the ordinary course of its business.

In connection with the normal operations of its business, the Debtor (i) collects, incurs and remits a variety of taxes, fees and other charges to various Mexican taxing authorities, and (ii) pays various regulatory fees, which are essential to the Debtor's international operations, to both foreign and domestic regulatory authorities or administrative agencies.

Payment of the prepetition taxes and regulatory fees is critical to the Debtor's continued, uninterrupted operations. Non-payment of the Taxes may cause the Taxing Authorities to take precipitous action, including conducting audits, filing liens, seeking to impose criminal liability against the Debtor and its directors and officers, and revoking licenses and concessions the Debtor needs to operate its satellites, Luc A. Despins, Esq., at Milbank, Tweed, Hadley & McCloy LLP, in New York, explains. This would disrupt the Debtor's day-to-day operations and could potentially impose significant costs on the Debtor's estate, Mr. Despins says.

Mr. Despins relates that the Taxes are not property of the Debtor's estate under Section 541 of the Bankruptcy Code. Many of the Taxes are collected or withheld by the Debtor on behalf of the applicable Taxing Authority and are held in trust by the Debtor for the Taxing Authorities' benefit.

The Tax Obligations

(A) Employee Salaries

The Debtor employs 187 full-time and 19 part-time employees. Other than the chief executive officer, who is employed directly by the Debtor, all of the Debtor's Employees are employed through its three non-debtor affiliates. Under Mexican law, the Debtor and the Employee Affiliates are jointly liable for payment of each Employee's wages and benefits.

The Debtor is obligated to pay withholding taxes to the Secretaria de Hacienda y Credito Publico, Mexican Ministry of Finance and Public Credit, relating to the salaries of its employees.

The Debtor's average monthly Withholding Tax obligation to its Employees aggregates $241,800. As of the date of filing for chapter 11 protection, the Debtor estimates that $258,000 in Withholding Tax obligations was accrued but unpaid on account of its Employees.

(B) Fees to Independent Service Providers

The Debtor is also obligated to pay withholding taxes to the MFPC on the fees charged by independent contractors, like self-employed accountants, attorneys and consultants, within the Mexican territory. The Debtor's average monthly Withholding Tax obligation to its Independent Service Providers aggregates $9,600. As of the date of filing for chapter 11 protection, the Debtor estimates that $6,226 in Withholding Tax obligations was accrued but unpaid on account of its Independent Service Providers.

(C) Social Security

Mexican law requires that each Employee become affiliated to the Instituto Mexicano del Seguro Social, Mexican Social Security Institute, Mexico's social security program. The Debtor is required to make monthly payments, through the applicable Employee Affiliate, to IMSS on account of each Employee.

The Debtor's average yearly Social Security obligations aggregate $1,100,000. As of the date of filing for chapter 11 protection, the Debtor estimates that $74,000 in Social Security obligations was accrued but unpaid.

In addition, each Employee is required to pay a quota to IMSS. The Debtor makes quarterly payments to IMSS to cover the Employees' quota obligation.

The aggregate annual cost to the Debtor of the Social Security Quota Support benefit is $176,000. As of the date of filing for chapter 11 protection, the Debtor estimates that $15,000 remains outstanding for its Social Security Quota Support obligations.

(D) VAT and Other Withholding Taxes

The Debtor is obligated to pay value-added taxes to the MFPC on the revenues it receives for certain goods and services it provides as well as on the expenses it pays on certain goods and services it receives. The Debtor's average monthly VAT obligations relating to revenues, as reduced by VAT obligations relating to expenses considered creditable pursuant to the VAT Law, aggregate $27,200. As of the date of filing for chapter 11 protection, the Debtor estimates that $36,200 was accrued but unpaid on account of VAT obligations on revenues.

The Debtor is also obligated to pay Withholding Taxes to the MFPC on certain royalties paid in connection with the broadcast segment of its business. The Debtor's average monthly Withholding Tax obligations relating to the Royalties aggregate $7,400. As of the date of filing for chapter 11 protection, the Debtor estimates that $8,900 in Withholding Tax obligations was accrued but unpaid on account of Royalties.

The Regulatory Fees

(A) Property Concessions

The Debtor's satellite operations are regulated by the Mexican Government. The Debtor is required to pay property concessions to Mexican Regulatory Authorities and Administrative Agencies every two months in connection with the concession it received from the Mexican Government that permits it to use its satellite control centers, and the related land and buildings on which they are located.

The Debtor's average bi-monthly Property Concession obligations aggregate $70,000. As of the date of filing for chapter 11 protection, the Debtor estimates that $71,400 in Property Concession obligations was accrued but unpaid.

(B) Landing Rights

The Debtor is required to obtain landing rights in the countries where it seeks to operate, and the Regulatory Authorities and Administrative Agencies in these countries impose charges on the licenses the Debtor needs for its operations.

The Debtor's Landing Right obligations, which are generally paid annually towards the end of the year, aggregated $39,200 for 2005. The Debtor's Landing Right obligations for 2006 have increased compared to previous years due to the recent launch of Satmex 6.

The Debtor estimates that its outstanding Landing Right obligations for 2006, through and including December 31, 2006, will total $97,545.

About Satelites Mexicanos

Satelites Mexicanos, S.A. de C.V., provides fixed satellite services in Mexico. Satmex provides transponder capacity via its satellites to customers for distribution of network and cable television programming, direct-to-home television service, on-site transmission of live news reports, sporting events and other video feeds. Satmex also provides satellite transmission capacity to telecommunications service providers for public telephone networks in Mexico and elsewhere and to corporate customers for their private business networks with data, voice and video applications. Satmex also provides the government of the United Mexican States with approximately 7% of its satellite capacity for national security and public purposes without charge, under the terms of the Orbital Concessions.

On May 25, 2005, certain holders of Satmex's Existing Bonds and Senior Secured Notes filed an involuntary chapter 11 petition against the Company (Bankr. S.D.N.Y. Case No. 05-13862).On June 29, 2005, Satmex filed a voluntary petition for a Mexican reorganization, known as a Concurso Mercantil, which was assigned to the Second Federal District Court for Civil Matters for the Federal District in Mexico City.

On August 4, 2005, Satmex filed a petition, pursuant to Section 304 of the Bankruptcy Code to commence a case ancillary to the Concurso Proceeding and a motion for injunctive relief seeking, among other things, to enjoin actions against Satmex or its assets (Bankr. S.D.N.Y. Case No. 05-16103). (Satmex Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000)

SECOND CHANCE: Court OKs Cox Hodgman as Debtor's Special Counsel---------------------------------------------------------------- The U.S. Bankruptcy Court for the Western District of Michigan allowed James W. Boyd, Esq., the trustee overseeing the liquidation of Second Chance Body Armor Inc., nka SCBA Liquidation Inc., to employ Cox, Hodgman & Giarmaco PC as his special counsel, nunc pro tunc to Nov. 22, 2005.

The Trustee needs Cox Hodgman to represent him in several pending lawsuits against the Debtor concerning insurance coverage for injuries caused by fireworks.

The attorney for Cox Hodgman who will be primarily responsible for the fireworks insurance litigation is William H. Horton. Mr. Horton charges an hourly rate of $210 for his services.

Other attorneys and paralegals may become involved in the litigation or related issues from time to time at their ordinary and customary hourly rates.

To the best of the Trustee's knowledge, Cox Hodgman does not hold any interest adverse to the Debtor and is a "disinterested person" pursuant to Sec. 101(14) of the Bankruptcy Code.

Based in Central Lake, Michigan, Second Chance Body Armor, Inc.-- http://www.secondchance.com/-- manufactures wearable and soft concealable body armor. The Company filed for chapter 11protection on Oct. 17, 2004 (Bankr. W.D. Mich. Case No. 04-12515)after recalling more than 130,000 vests made wholly of Zylon, butit did not recall vests made of Zylon blended with otherprotective fibers. Stephen B. Grow, Esq., at Warner Norcross &Judd, LLP, represented the Debtor. Daniel F. Gosch, Esq., at Dickinson Wright PLLC, represented the Official Committee of Unsecured Creditors. The Debtor's case was converted into chapter 7 proceeding on Nov. 22, 2005 (Bankr. W.D. Mich. Case No. 04-12515). James W. Boyd, Esq., serves as trustee to the Debtor's assets and is represented by Ronald A. Schuknecht, Esq., at Lewis Schuknecht & Keilitz PC. When the Debtor filed for protection from its creditors, it listed estimated assets and liabilities of $10 million to $50 million.

SECOND CHANCE: Selects Jaffe Raitt as Counsel in Insurance Suits---------------------------------------------------------------- James W. Boyd, Esq., the trustee overseeing the liquidation of Second Chance Body Armor Inc., nka SCBA Liquidation Inc., asks the U.S. Bankruptcy Court for the Western District of Michigan to employ Jaffe Raitt Heuer & Weiss as his special counsel, nunc pro tunc to May 1, 2006.

Jaffe Raitt will represent the Trustee in lawsuits concerning personal injuries suffered by users of the Debtor's products.

Specifically, the Firm will handle litigation of remaining insurance coverage issues involving Royal Indemnity Company, the Debtor's insurer contesting its insurance obligations with regards to the lawsuits.

The attorneys from Jaffe Raitt who will be primarily responsible for the insurance coverage issues are James J. Parks and Michael A Rajt. Mr. Park charges $300 an hour and Mr. Rajt charges $325 and hour for their services.

Other attorneys and paralegals may become involved in the insurance coverage issues or related issues from time to time at their ordinary and customary hourly rates.

Jaffe Raitt said it will need to retain local counsel should insurance coverage issues arise in any of the lawsuits. The Firm proposes to pay any local counsel it retains and submit any amounts paid for reimbursement as an allowable expense on a monthly basis.

To the best of the Trustee's knowledge, Jaffe Raitt does not hold any interest adverse to the Debtor and is a "disinterested person" pursuant to Sec. 101(14) of the Bankruptcy Code.

Based in Central Lake, Michigan, Second Chance Body Armor, Inc.-- http://www.secondchance.com/-- manufactures wearable and soft concealable body armor. The Company filed for chapter 11protection on Oct. 17, 2004 (Bankr. W.D. Mich. Case No. 04-12515)after recalling more than 130,000 vests made wholly of Zylon, butit did not recall vests made of Zylon blended with otherprotective fibers. Stephen B. Grow, Esq., at Warner Norcross &Judd, LLP, represented the Debtor. Daniel F. Gosch, Esq., at Dickinson Wright PLLC, represented the Official Committee of Unsecured Creditors. The Debtor's case was converted into chapter 7 proceeding on Nov. 22, 2005 (Bankr. W.D. Mich. Case No. 04-12515). James W. Boyd, Esq., serves as trustee to the Debtor's assets and is represented by Ronald A. Schuknecht, Esq., at Lewis Schuknecht & Keilitz PC. When the Debtor filed for protection from its creditors, it listed estimated assets and liabilities of $10 million to $50 million.

The Rating Outlook is Stable. Approximately $2.3 billion of debt is covered by these actions.

The rating reflects SPC's high leverage with FFO adjusted leverage of 8.06x as well as debt/EBITDA of 7.68x for the last 12 months ending July 2, 2006. Much of SPC's $2.3 billion in total debt was the result of seven acquisitions completed since the fiscal year ended Sept. 30, 2003, with the bulk occurring in 2005.

The acquisitions served to lessen the company's reliance on essentially one product -- the Rayovac battery. However, poor performance in batteries combined with high levels of acquisition-related debt has hampered free cash flow which declined from $163.5 million at the FYE Sept. 30, 2005, to $22 million at the LTM ending July 2, 2006. There has also been a declining trend in interest coverages since the 2005 acquisitions. EBITDA/interest has fallen steadily from 3.09x at FYE03 to 1.75x at LTM July 2, 2006.

The company's high leverage provided little flexibility for a myriad of issues over the past two years:

* competitive actions in grooming;

* a structural change in the European battery market;

* retailer inventory adjustments in batteries and lawn & garden during 2005 and 2006 in North America; and

* escalating commodity costs which served to more than offset restructuring savings and price increases.

SPC is a leading provider of private label batteries in its Europe/Rest of World segment. Batteries represent 70% of this segment and about half is private label. Private label is growing rapidly, however margins are significantly less robust than SPC's branded batteries and continues to be under pressure.

The Europe/ROW segment represented 29% of revenues and 30% of operating income (before corporate overhead and restructuring and related charges) for the nine months ending July 3, 2005, with a nine month operating margin of 14.6%. For the comparable period in 2006, revenues have declined 17% with operating profits down 43%. Part of the revenue decline was the company walking away from $30 million in low-margined revenues.

SPC intends to remain a private-label participant. Given that the pressure is expected to continue while the company works on lowering its operating costs, profits from this key region is expected to be a drag on the consolidated performance in the near term.

Additionally, while the company has hedged it zinc exposure through the first half of FYE07, the reset in light of expected tightness in the zinc market and other energy related costs will contribute to margin pressure as well. The current trajectory in the near term appears negative without actions to provide additional financial flexibility.

SPC's management has historically been able to achieve cost savings ahead of schedule. The company is in the process of three separate actions:

* acquisition integration; * flattening the North American organization; and * reorganizing its European operation.

These are expected to lead to cost savings of $150 million by 2008. The company reports that it is on track with all initiatives. The ability to execute on cost savings and the company's leading brands are also encompassed in the ratings.

The company has had to amend their financial covenants twice in the past year to address declining operations. Thus, a concern is that continued declines in Europe which will take several quarters to address, potential competitive actions by participants who have substantially more resources, as well as increased commodity costs still exist and could continue to pressure margins and complying with covenants. SPC reports that it should comply with its covenants into the foreseeable future but the ratios appear to be relatively tight. SPC's ability to continue working well with its bank group is necessary.

The Rating Outlook is Stable as the company has announced their discomfort with the present levels of leverage given underperformance against forecast and has hired Goldman Sachs to evaluate potential asset sales. The company's intent is to review its line of business with a plan to begin executing asset sales by next spring. Lines of businesses to be sold, cash flow lost and amount of debt reduction is unknown at present. The goal to de-leverage is viewed positively in light of recent performance trends. Incorporated into the Stable Outlook is the expectation that the company will be able to receive waivers, if needed, from its debt-holders.

The Recovery Ratings and notching in the debt structure reflect Fitch's recovery expectations under a scenario in which distressed enterprise value is allocated to the various debt classes. The recovery ratings for the bank facility ('RR1', reflecting 91%-100% recovery) benefit from a substantial enterprise value which more than covers maximum outstanding. There is also covenants and conditions precedent to each loan which provides protection and precludes sizeable amounts of debt without sizeable increases in cash flow. The senior subordinated debentures ('RR5', reflecting expected recovery of 10%-30%) reflect the expectation of below average recovery prospects in a distressed case.

Virtually all of SPC's revenue growth from $573 million in FYE02 to the $2.359 billion in FYE05 was derived from acquisitions. Revenues in the nine months ending July 2, 2006, also increased 13% to $1.943 billion benefiting from late FYE05 acquisitions. It is to be noted however that if sales were adjusted to assume that all acquisitions during 2005 were treated as if they had been completed on the first day of fiscal 2005 (pro forma), net sales for the nine months would have declined 6%.

On an as reported basis, FYE05's gross margin declined 480bps to 37.9% due to mix (320bps) and purchase accounting inventory value charges (160bps) which increased costs of goods sold. A normalized EBITDA margin with the 160bps added back would be 14%.

However, poor performance in batteries and escalating commodity costs during the nine months ending July 2, 2006, reduced the EBITDA margin to 11.5% -- 250bps below prior year. Thus while leverage (debt/EBITDA) is down slightly to 7.7x from 7.9x at the end of the fiscal year, LTM July 2, 2006 EBITDA/interest has continued to weaken as the current fiscal year bears the full brunt of the debt and interest rate increases as the financial covenants were amended in December and May.

STANDARD PACIFIC: Reports $96.5 Mil. Net Income in Second Quarter-----------------------------------------------------------------Standard Pacific Corp. reported its 2006 second quarter operating results. Net income for the quarter ended June 30, 2006, was $96.5 million compared to $107.6 million in the year earlier period. Homebuilding revenues were up 5% to a record $1 billion for the 2006 second quarter versus $952 million last year.

Stephen J. Scarborough, Chairman and Chief Executive Officer, stated, "The changing market tone that surfaced at the end of 2005 has continued to evolve during the first half of 2006, and we are clearly facing an increasingly competitive environment in most of our major markets across the country. We are impacted by growing levels of both new and existing home inventories, a steadily increasing interest rate environment, reduced affordability and weaker homebuyer confidence. All of these conditions have resulted in lower sales rates and higher levels of cancellations which have given rise to a greater use of incentives and other forms of discounting."

"It is difficult to predict when market conditions will stabilize and improve in our primary markets. However, we are taking the necessary steps to respond to the challenges that we all face while positioning the Company for the future. We have intensified our effort to manage our cash flows, including slowing our starts and reducing our capital outlays for land. And while we have had reasonable success during the first half of the year with the introduction of a number of our new communities that are well located and competitively priced, we have moderated our planned openings for the balance of the year in response to the slowing market environment that we face."

"Going forward, we will continue to adjust our new home pricing strategy to balance our volume and margin objectives. During the quarter we were able to generate a relatively strong gross margin of 27.2% with a modest 2% reduction in unit deliveries year over year. We are also working to realign our fixed cost structure to match current activity levels and continue our efforts to reduce our production costs while improving our cycle times."

Mr. Scarborough continued, "We have adjusted our business plan for 2006 to respond to these challenging market conditions and to reflect our expectation of generally lower absorption rates on a project-by-project basis going forward. We are targeting approximately 10,400 deliveries, excluding 425 joint venture homes, homebuilding revenues of approximately $4 billion, and earnings of $5.10 to $5.40 per share. Our expectations for the balance of the year are supported by our backlog of nearly 5,500homes, valued at $2.1 billion, which, while subject to cancellations, represents approximately 95% of our projected 2006 revenue target when combined with our first half results. For the third quarter we are projecting approximately 2,275 deliveries, excluding 50 joint venture homes, and homebuilding revenues of approximately $850 million, with initial earnings guidance of $0.80 to $0.85 per share."

"We continue to be focused on maintaining a sound balance sheet and diversified capital structure. We ended the quarter with over $1.8 billion in shareholders' equity, and leverage within our targeted range. In addition, to further strengthen our balance sheet and improve our liquidity during the quarter, we refinanced $350 million of revolver borrowings with two new term loans, increased our revolving credit facility commitment to $1.1 billion and added a new $400 million accordion feature to the facility."

Mr. Scarborough concluded, "During the second quarter we repurchased an additional 1.9 million shares, which brings our year-to-date total to nearly 3.3 million shares, which depleted our previous $100 million buyback authorization. Accordingly, our Board approved a new $50 million repurchase limit for additional buybacks. While we believe that share repurchases at current prices are a sound use of our capital, we will be thoughtful about the degree of future buybacks so as not to undermine the strength of our balance sheet and our credit quality."

Homebuilding Operations

Homebuilding pretax income for the 2006 second quarter decreased 11% to $154.1 million from $172.4 million in the year earlier period. The decrease in pretax income was driven by a 30 basis point lower homebuilding gross margin percentage, a 130 basis point increase in the Company's SG&A rate and a $15.8 million decrease in other income. These negative factors were partially offset by a 5% increase in homebuilding revenues and a $6.0 million increase in joint venture income.

Homebuilding revenues for the 2006 second quarter increased 5% to $1,003.9 million from $952.3 million last year. The increase in revenues was primarily attributable to an 8% increase in the Company's consolidated average home price to $374,000, partially offset by a 2% decrease in new home deliveries.

The 2% decrease in new home deliveries companywide was influenced by these regional operations. During the 2006 second quarter, the Company delivered 703 new homes in California (exclusive of joint ventures), an 8% decrease from the 2005 second quarter. Deliveries were up 12% in Southern California to 526 new homes (excluding 16 joint venture deliveries) reflecting the rebound in order activity last year. Deliveries were down 41% in Northern California to 177 new homes (excluding 34 joint venture deliveries), and primarily reflects the decrease in new home orders we began to experience in the second half of 2005 resulting from a slowdown in new home demand, coupled with a decrease in the number of active selling communities during the same period, particularly in the San Francisco Bay area. In Florida, the Company delivered 756 new homes in the second quarter of 2006, representing a 10% year-over-year decline. The lower Florida delivery total was due to a modest decrease in net new orders in the state last year combined with an increase in the state's cancellation rate during the first half of 2006. The Company delivered 275 homes (excluding 5 joint venture deliveries) during the 2006 second quarter in Arizona, a 48% decrease from the 2005 second quarter. The lower level of new home deliveries was due to a modest decline in net new orders in the state last year as well as a significant jump in the Phoenix division's cancellation rate during the second quarter of 2006. In the Carolinas, deliveries were off 18% to 219 new homes driven primarily by a slight reduction in the number of active selling communities this year, coupled with a modest slowdown in order activity during the 2006 second quarter. New home deliveries were up 171% in Texas to 574 new homes, driven by improving market conditions in Dallas and Austin, combined with the delivery of 303 homes from the Company's new San Antonio division. Deliveries were up 21% in Coloradoto 150 new homes for the quarter.

During the 2006 second quarter, the Company's average home price increased 8% to $374,000. The Company's regional average home prices changed as follows. The Company's average home price in California was $729,000 for the second quarter of 2006, a 10% increase from the year earlier period. The higher average home price was primarily due to a greater delivery mix of more expensive homes from the Company's Orange County, Ventura, and San Diego divisions in Southern California. The Company's average price in Florida was up 16% from the year ago period to $271,000, and primarily reflects the impact of general price increases throughout the state experienced last year and, to a lesser degree, a shift in product mix. The Company's average price in Arizona was up 51% to $318,000, primarily reflecting the strong level of price appreciation experienced in Phoenix during 2004 and much of 2005. The Company's average price was up 21% in the Carolinas and primarily reflected a change in delivery mix. The Company's average price in Texas was down 15%, primarily reflecting the addition of San Antonio last year, where its average home price was $145,000. Companywide, Standard Pacific expects that its full-year average new home price will increase approximately $38,000, or 11%, to $385,000 in 2006. The Company is projecting a 2006 third quarter average home price of $375,000, up 11% over the 2005 third quarter average. The expected increase in the 2006 third quarter and full year average home prices primarily reflect the significant appreciation in new home prices experienced in the Phoenix market in 2005 and the more moderate level of price appreciation experienced in the California and Florida markets over the same time period.

The Company's 2006 second quarter homebuilding gross margin percentage was down 30 basis points year-over-year to 27.2%. The slight decrease in the year-over-year gross margin percentage was driven primarily by a lower gross margin in Southern California offset, in part, by higher gross margins in Northern California, Florida, and Arizona. In addition, margins in the Carolinas and Texas continue to improve, but are still below its company-wide average. The higher gross margin percentages in most of its markets reflected its ability to raise home prices during much of 2005 as a result of healthy housing demand during the year. The Company's homebuilding gross margin percentage for the 2006 third quarter is expected to be in the 23.0% to 24.0% range, while its margin for the full year is expected to be approximately 25.0% to 25.5%. While difficult to estimate under changing market conditions, the Company's 2006 full year gross margin guidance reflects its best estimate at this time for the level of incentives needed in certain of its markets to sell homes.

Selling, general and administrative expenses (including corporate G&A) for the 2006 second quarter increased 130 basis points to 12.3% of homebuilding revenues, which was at the low end of the Company's guidance for the quarter, and compared to 11.0% last year. The higher level of SG&A expenses as a percentage of homebuilding revenues was primarily due to:

1) increased levels of sales and marketing expenses, including outside sales commissions and advertising, as a result of the general slowdown in new housing demand in the Company's largest markets;

2) the shifting geographic mix of its deliveries, where the Company's non-California operations generally incur higher levels of SG&A expenses as a percentage of revenues;

3) an increase in equity-based compensation, including the cost of expensing stock options and other share-based awards; and

4) overhead incurred in connection with the Company's start-up operations in Bakersfield, the Central Valley of California and Las Vegas.

The Company's projected SG&A rate for 2006 is expected to be approximately 12.0% to 12.5%, while the 2006 third quarter rate is expected to be approximately 13.5% to 14.0%.

Income from unconsolidated joint ventures was up $6 million for the 2006 second quarter to $19.2 million. For the quarter, $14 million of joint venture income was generated from land sales to other builders while $5.4 million was generated from new home deliveries. Deliveries from the Company's unconsolidated homebuilding joint ventures totaled 55 new homes in the 2006 second quarter versus 109 last year. For 2006, the Company is projecting approximately $60-$65 million in total joint venture income of which $25 million is expected to be generated from approximately 425 new home deliveries and approximately $40 million is projected from profits from joint venture land sales to other builders. For the 2006 third quarter, the Company is projecting $6 million in total venture income, of which $3 million is expected to be generated from the delivery of approximately 50 joint venture homes and approximately $3 million is projected from venture land sale income.

Headquartered in Irvine, California, Standard Pacific Corp. (NYSE: SPF) -- http://www.standardpacifichomes.com-- has built homes for more than 82,000 families during its 40-year history. One of the nation's largest homebuilders, the Company constructs homes within a wide range of price and size targeting a broad range of homebuyers. Standard Pacific operates in some of the strongest housing markets in the country with operations in major metropolitan areas in California, Florida, Arizona, the Carolinas, Texas, Colorado, and Nevada. The Company provides mortgage financing and title services to its homebuyers through its subsidiaries and joint ventures, Family Lending Services, WRT Financial, Westfield Home Mortgage, Home First Funding, Universal Land Title of South Florida and SPH Title.

* * *

Standard & Poor's Ratings Services affirmed its 'BB' corporate credit rating on Standard Pacific Corp. At the same time, the 'BB' rating on the company's senior unsecured notes and the 'B+' rating on its subordinated notes are also affirmed, affecting $1.25 billion of rated securities. The outlook is positive.

STERLING FINANCIAL: Inks $30 Mil. Credit Facility with Wells Fargo------------------------------------------------------------------Sterling Financial Corporation has entered into a $30 million one-year variable-rate revolving credit facility with Wells Fargo Bank, National Association, replacing a $40 million credit facility the Company had with Bank of Scotland.

The Bank of Scotland line expired in May of 2006, with a $20 million outstanding draw, which was paid off using the Company's cash reserves.

The facility will ensure that the Company has the working capital and liquidity it needs as it continues to expand its franchise footprint. The Company anticipates that borrowings under the facility will be used for general corporate purposes.

Sterling Financial Corporation (Nasdaq: STSA) of Spokane, Washington, is a bank holding company, the principal operating subsidiary of which is Sterling Savings Bank. Sterling Savings Bank is a Washington State-chartered, federally insured commercial bank, which opened in April 1983 as a stock savings and loan association. Sterling Savings Bank, based in Spokane, Washington, has financial service centers throughout Washington, Oregon, Idaho and Montana. Through Sterling Saving Bank's wholly owned subsidiaries, Action Mortgage Company and INTERVEST-Mortgage Investment Company, it operates loan production offices in the western region. Sterling Savings Bank's subsidiary, Harbor Financial Services, provides non-bank investments, including mutual funds, variable annuities and tax- deferred annuities and other investment products, through regional representatives throughout Sterling Savings Bank's branch network.

As reported in the Troubled Company Reporter on Mar. 20, 2006,PricewaterhouseCoopers LLP expressed substantial doubtSuperconductor Technologies Inc.'s ability to continue as a goingconcern after it audited the Company's financial statements forthe years ended Dec. 31, 2005, and 2004. The auditing firmpointed to the Company's recurring losses and the $9,404,000 incash used for operations in 2005.

TELOS CORPORATION: Equity Deficit Widens to $119 Mil. at June 30----------------------------------------------------------------Telos Corporation filed its financial statements for the three months ended June 30, 2006, on Form 10-Q, with the Securities and Exchange Commission on Aug. 14, 2006.

The Company's balance sheet at June 30, 2006 showed total assets of $41 million and total liabilities of $160 million resulting in a total stockholders' deficit of $119 million. Its total stockholders' deficit at Dec. 31, 2005, stood at $97 million.

Sales for the second quarter of 2006 were $35.8 million, an increase of $11.2 million or 45.7%, compared to the second quarter 2005 sales of $24.5 million. The Company's gross profit for the second quarter of 2006 increased by $2.2 million to $7 million compared to the same period in 2005.

The Company's operating income for the second quarter of 2006 was $14,000, compared to $3.2 million of operating loss in the same period in 2005. It reported net loss for the second quarter of 2006 was $13.9 million, an increase of $8.6 million compared to $5.3 million net loss in the same period in 2005.

The Company's sales for the six months ended June 30, 2006 were $61 million, an increase of $1.4 million or 2.3%, compared to sales of $59.6 million for the same period in 2005. Its gross profit for the six months ended June 30, 2006 decreased by $800,000 to $11.5 million compared to the same period in 2005.

Operating loss for the six months ended June 30, 2006 was $5.9 million, compared to $2.7 million of operating loss in the same period in 2005. The Company's net loss for the six months ended June 30, 2006 was $22 million, an increase of $16.1 million compared to $5.9 million net loss in the same period in 2005.

At June 30, 2006, the Company had outstanding borrowings of $11.5 million and unused borrowing availability of $2.5 million on the Facility. The effective weighted average interest rates on the outstanding borrowings under the Facility were 12.3% and 9.9% for the six months ended June 30, 2006 and 2005, respectively.

For the six months ended June 30, 2006, the Company reported that cash provided by continuing operating activities was $1.6 million.

The Company further reported that at June 30, 2006, it had outstanding debt and long-term obligations of $120.4 million, consisting of $11.5 million under the Facility, $5.2 million in subordinated debt, $9.6 million in capital lease obligations and $94.1 million in redeemable preferred stock.

Telos Corporation is a systems integration and services company addressing the information technology needs of U.S. Government customers worldwide. The Company also owns all of the issued and outstanding share capital of Xacta Corporation, a subsidiary that develops, markets and sells U.S. Government-validated secure enterprise solutions to federal, state and local government agencies and to financial institutions.

TFS ELECTRONIC: Plans to Pay Unsecured Creditors 73% of Claims--------------------------------------------------------------The Honorable Redfield T. Baum, Sr., of the U.S. Bankruptcy Court for the District of Arizona preliminarily approved the Disclosure Statement explaining TFS Electronic Manufacturing Services, Inc.'s Plan of Reorganization and ordered the Debtor to file an amended Disclosure Statement.

As directed, the Debtor filed an Amended Disclosure Statement on Aug. 15, 2006.

The Debtor contemplates an orderly liquidation of its remaining assets and distribution of certain settlement funds. The Debtors proposes to establish a liquidating trust that will be administered by a Liquidating Trustee. On the effective date of the Plan, the Debtor's remaining assets, including its available cash will be transferred to the Liquidating Trust for the benefit of creditors. After that, the Trust will be responsible for liquidating all of the remaining assets and making distributions to creditors. The Debtor currently holds $5.4 million in cash as part of the proceeds of the sale of substantially all of its assets to Applied Technical Services Corp. on Oct. 28, 2005. The Debtor also has around and $200,000 in miscellaneous accounts receivable.

Classification and Treatment of Claims

Holders of prepetition secured tax claims will retain their lien on some assets. The claims will earn 6% interest annually until paid in full.

Holders of secured claims will have either:

(a) their collateral; or

(b) a five-year note in the fair market value of the collateral, earning 5% interest annually and payable in 60 equal installments of principal and interest.

Holders of claims below $300 or those who elect to reduce their claims to $300 will be paid in full on the Effective Date.

Holders of general unsecured claims, aggregating around $5 million, will each receive a pro rata share of a settlement fund, except for Willows. Under a global settlement among the Debtor, the Official Committee of Unsecured Creditors and the Debtor's parent, Three-Five Systems, Inc., Willows is allowed a $1,482,300 general unsecured claim but will be given a maximum of $577,000 under that claim. Under that settlement, around $3,125,000 will be used to fund distributions for unsecured creditors. Estimated recovery for each unsecured creditor is 73%

Three-Five Systems holds an allowed $13,069,000 subordinated claim. Three-Five Systems will be paid out of settlement funds after deducting $3,125,000 for distribution to unsecured creditors. Three-Five Systems will also receive funds recovered from litigation against Topsearch Printed Circuits (HK), Ltd.

Three-Five Systems will also get all of the Debtor's unliquidated assets and accounts receivable except avoidance actions.

The Court will consider final approval of the Disclosure Statement and confirmation of the Plan on Sept. 12, 2006. Ballots and objections are due Sept. 7, 2006. The Debtor has until Sept. 11, 2006, to reply to objection.

Headquartered in Redmond, Washington, TFS Electronic ManufacturingServices, Inc., was an electronics manufacturing services facilitythat specializes in New Product Introduction services, prototypeDevelopment and low to medium-volume manufacturing. The Companyfiled for chapter 11 protection on August 19, 2005 (Bankr. D.Ariz. Case No. 05-15403). John R. Clemency, Esq., Keriann M.Atencio, Esq., and Tajudeen O. Oladiran, Esq., at GreenbergTraurig LLP, represent the Debtor in its restructuring efforts.Brian N. Spector, Esq., at Jennings Strouss & Salmon, PLC,represents the Official Committee of Unsecured Creditors. Whenthe Debtor filed for protections from its creditors, it estimatedassets between $1 million to $10 million and estimated debtsbetween $10 million to $50 million.

THINKPATH INC: Posts $960,000 Net Loss in Quarter Ended June 30---------------------------------------------------------------For the three months ended June 30, 2006, Thinkpath Inc. recorded a net loss of $960,000, compared to a net loss of $800,000 for the three months ended June 30, 2005. For the six months ended June 30, 2006, the company recorded a net loss of $1,340,000, compared to a net loss of $940,000 for the three months ended June 30, 2005.

Thinkpath generated $3,790,000 of revenues for the quarter ended June 30, 2006, a $190,000 or 5% increase compared to $3,600,000 for the three months ended June 30, 2005. This increase is largely attributable to the acquisition of The Multitech Group Inc. that contributed $750,000 in revenue since its effective date of April 1, 2006.

Without the TMG contribution, revenue from original operations was down $560,000. This decrease is a direct result of the decline in sales of approximately $600,000 from one major customer located in the United States who represented only 8% of the Company's consolidated revenue for the three months ended June 30, 2006 compared to 25% for the three months ended June 30, 2005.

Gross profit for the three months ended June 30, 2006 increased by $160,000 or 15% to $1,230,000 compared to $1,070,000 for the three months ended June 30, 2005. This increase is due to the increase in gross profit in Canada from 13% for the three months ended June 30, 2005 to 32% for the three months ended June 30, 2006 resulting from the addition of several higher margin engineering service projects and contract placements.

For the three months ended June 30, 2006, the company recorded a loss from continuing operations of $960,000 compared to a loss of $820,000 for the three months ended June 30, 2005. This loss can be attributed to the increase in administrative and sales expenses for the three months ended June 30, 2006 of approximately $230,000 and $130,000 respectively, related to the additional salaries and overhead incurred as a result of the TMG acquisition since its effective date of April 1, 2006.

In addition, depreciation and amortization costs for the three months ended June 30, 2006, increased by $90,000 related to the amortization of additional capital assets and other assets including contracts and customer lists acquired with the TMG acquisition.

Non-cash financing costs related to the company's debt with Laurus Master Fund, Ltd. increased to $580,000 for the three months ended June 30, 2006 compared to $5,000 for the same period last year.

At June 30, 2006, the company had a working capital deficiency of $1,790,000 largely related to the new debt associated with the TMG acquisition compared to a working capital deficiency of $780,000 at Dec. 31, 2005. At June 30, 2006 the company had stockholder's equity of $2,400,000 compared to stockholder's equity of $2,020,000 at December 31, 2005.

"We realize the second quarter results we are reporting are a disappointment especially after the positive announcements made bout the acquisition of TMG and our recent contract awards," said Declan French, Chairman and Chief Executive Officer.

"Nonetheless, we are still confident that we have made a strong acquisition that not only provides solid customers, increased geographic scope and service offerings, but most importantly, experienced management and staff. Unfortunately, the timing of the acquisition coincided with what has historically been TMG's weakest quarter as well as the delay of several major material handling construction projects until the later part of the year.

"This, coupled with our own struggles to recoup the sales lost from our major customer and the increased expenses associated with the acquisition and investments into our sales team, resulted in greater losses for the second quarter than anticipated. With TMG's pipeline and the slow but gradual successes of our sales team, we expect to see positive results in the later part of the third quarter and fourth quarter of this year."

As reported in the Troubled Company Reporter on May 16, 2006,Schwartz Levitsky Feldman LLP, Chartered Accountants, in Toronto,Ontario, Canada, raised substantial doubt about Thinkpath Inc.'sability to continue as a going concern after auditing theCompany's consolidated financial statements for the years endedDec. 31, 2005, and 2004. The auditor pointed to the Company'srecurring losses from operations and negative working capital.

Thinkpath Inc. -- http://www.thinkpath.com/-- is a global provider of technological solutions and services in engineering knowledge management, including design, drafting, technical publishing, and consulting. Thinkpath enables corporations to reinvent themselves structurally; drive strategies of innovation, speed to market, globalization and focus in new and bold ways.

TOWER AUTOMOTIVE: Asks Court to Reject UAW & IUE-CWA Settlement---------------------------------------------------------------Tower Automotive Inc. and its debtor-affiliates ask the U.S Bankruptcy Court for the Southern District of New York to reject their collective bargaining agreement with the Unions, and modify retiree benefits pursuant to Sections 1113 and 1114 of the Bankruptcy Code.

The Debtors ask the Court to:

(a) approve their settlement with various retirees from the United Automobile, Aerospace and Agricultural Implement Workers of America, and the IUE, the Industrial Division of the Communication Workers of America AFL-CIO; and

(b) find that the Voluntary Retirees Beneficiary Association Trusts established pursuant to the settlement agreement with the UAW, the IUE-CWA, and Milwaukee Unions, do not violate Section 186 of the Labor Code.

Prior to making the Section 113/114 proposals, an actuarialvaluation conducted by the Debtors' benefits consultants, TowersPerrin, estimated the present value of the Debtors' retireewelfare benefits as of September 30, 2005 -- the 2005 APBO --at $178,000,000, of which:

$133,000,000 related to current retirees; and $45,000,000 related to anticipated costs of future retirees.

Of the 2005 APBO, approximately $16,000,000 was attributed toretirees represented by the UAW and the IUE-CWA. Projectedpayment of retiree welfare benefits for the UAW and the IUE-CWAfor year 2006 is approximately $1,000,000.

In May 2006, the Court authorized the Debtors to enter into asettlement agreement modifying retiree benefits with theMilwaukee Unions and the Official Committee of Retired Employees.The Milwaukee Unions and the Retiree Committee represent 90% ofthe 2005 APBO and more than 90% of the projected 205 cash cost ofretiree welfare benefits.

The UAW and the IUE-CWA represent the last retirees that comprisethe 2005 APBO, and by entering into the Settlement with the UAWand the IUE-CWA, the Debtors will have consensually modified theremaining obligations without need for the Court to decide on theSection 1113/1114 Motion, Anup Sathy, Esq., at Kirkland & EllisLLP, in Chicago, Illinois, explains.

Through good faith and arm's-length negotiations for over ninemonths, the Debtors, the UAW and the IUE-CWA have reached theSettlement, which addresses the remainder of the Debtors' retireewelfare liability and gives the Debtors much-needed cash reliefgoing forward. Aside from certain minimal up-front cash fundingobligations, the Debtors will be freed from virtually all cashobligations to the retirees represented by the UAW and the IUE-CWA, Mr. Sathy tells the Court.

Furthermore, the Settlement resolves several ancillary issues,including releasing the Debtors from all claims, causes of actionand other outstanding issues between the Debtors and the Unions.

Under the Settlement, the UAW agreed to act as the authorizedrepresentative under Section 1114 for union retirees from threefacilities formerly operated by the Debtors or the Debtors'predecessors:

The IUE-CWA represents the various current and future retireesfrom the Debtors' Greenville, Michigan location.

Settlement Terms

According to Mr. Sathy, the Debtors' Settlement with the UAW andthe IUE-CWA is patterned after the settlements with the MilwaukeeUnions and the Retiree Committee.

The significant terms of the Settlement are:

* The life insurance coverage provided by the Debtors to Union Retirees will be immediately reduced to the lowest level of coverage for which each individual would ever be eligible under the terms of the current retiree life insurance program;

* The Greenville Retirees will collectively be granted a $12,000,000 allowed general unsecured claim against R.J. Tower Corporation, the distribution of which will be made in cash or equity, in the Debtors' sole discretion;

* The Greenville Retirees will have a $12,000,000 allowed general unsecured claim against the U.S. entities that are debtors and operating subsidiaries of R.J. Tower, to be allocated proportionally against entities that employed the Greenville Retirees or previously acquired entities that employed Greenville Retirees. The Debtors and the Greenville Retirees agree to cooperate to allocate the Greenville Domestic Claim among the Greenville Retirees. Any unresolved dispute regarding allocation will be resolved by the Bankruptcy Court. To the extent the Disclosure Statement Value attributable to the Greenville Claim is less than the Greenville Claim Floor Recovery, the Debtors will provide additional recovery, in the form of cash or equity, as necessary;

* The Debtors will continue making contributions to the cost of retiree medical, life insurance, prescription drug and dental coverage for current Greenville Retirees and eligible dependents under the terms of existing plans, including any supplemental, ancillary or "retiree benefits" through and including August 31, 2006. By September 1, the Debtors will cease to sponsor any medical, prescription drug, dental or other health care coverage for the Greenville Retirees;

* The Debtors will continue making contributions to the cost of retiree medical, life insurance, prescription drug and dental coverage for current UAW Retirees and eligible dependents under the terms of existing plans, including any supplemental, ancillary or "retiree benefits", through and including September 30, 2006. By October 1, the Debtors will cease to sponsor any medical, prescription drug, dental or other health care coverage for the UAW Retirees;

* On September 1, 2006, the Debtors will make a $500,000 cash distribution -- less any amounts paid by the Debtors for Retiree Health Benefits for covered services received by Greenville Retirees between July 1 and August 31 -- to the Greenville VEBA. By October 1, the Debtors will make a $125,000 cash distribution to the UAW Trust -- less any amounts paid by the Debtors for Retiree Health Benefits for covered services received by UAW Retirees between July 1 and September 30. On the earlier of (a) January 1, 2007, and (b) the effective date of the Debtors' plan of reorganization, and in lieu of any future payments, the Debtors will make an additional distribution to the Greenville VEBA of $1,106,000 in cash, a distribution of $44,000 to certain IUE-CWA grievants, and an additional $200,000 cash distribution to the UAW Trust;

* The Debtors will offer Union Retirees an opportunity to elect Consolidated Omnibus Budget Reconciliation Act continuation coverage for the lifetime of the Union Retirees, and until 36 months after the death of the Union Retirees for their eligible dependents; and

* The Debtors and the UAW Retirees and Greenville Retirees agree to a broad, mutual release of claims, including pending litigation, arbitration proceedings, NLRB proceedings, grievances, and all other claims and causes of actions relating to the Retiree Health Benefits from the beginning of time through the date of the settlement.

The Settlement, which represents an extremely favorable outcometo a difficult, but necessary negotiating process, resolves allpresent or future claims or causes of action of the UnionRetirees, eliminates the need for arbitration and litigationproceedings, and will result in substantial and immediate cashsavings, Mr. Sathy says.

Unless written objections are received by August 25, 2006, theDebtors' request will be deemed granted without a hearing.

TOWER AUTOMOTIVE: Unions Approve New Labor Agreements -----------------------------------------------------Tower Automotive Inc. ratified contract agreements with the United Auto Workers union and the United Steelworkers union covering 1,000 employees at Tower facilities in Michigan, Ohio and Tennessee, on Aug. 25, 2006. The agreements, when combined with agreements reached earlier with Tower's Milwaukee unions and its retirees, along with the closing of the Greenville, Michigan, plant later this year, will result in total annual cost savings of more than $31 million. Achieving a reduction in labor costs has been a key element in Tower's plan to improve its competitiveness and allow it to emerge from Chapter 11 bankruptcy. The agreements must be approved by the U.S. Bankruptcy Court overseeing Tower's Chapter 11 case in order to take effect.

As part of the contracts, Tower plants in Elkton, Michigan, and Bluffton, Ohio, agreed to increased health care contributions, labor wage reductions and fewer holidays.

"The issues addressed in this agreement, while very difficult, were strong and necessary steps for these plants to assure their future viability," said Kathleen Ligocki, president and chief executive officer of Tower. "The result will give us cost savings critical to Tower's reorganization plan. I want to thank our Tower colleagues for all their hard work and dedication that are so important to our reorganization process."

Approval of the contract by the Bankruptcy Court will keep Tower on track to file its Plan of Reorganization later this year. The company intends to emerge from Chapter 11 before the end of 2006.

The sole purpose of the meeting will be to form a committee orcommittees of unsecured creditors in the Debtors' cases. Themeeting is not the meeting of creditors pursuant to Section 341of the Bankruptcy Code. However, a representative of the Debtorswill attend and provide background information regarding thecases.

Creditors interested in serving on a Committee should completeand return to the U.S. Trustee a statement indicating theirwillingness to serve on an official committee.

Official creditors' committees, constituted under Section 1102 ofthe Bankruptcy Code, ordinarily consist of the seven largestcreditors who are willing to serve on a committee. In someChapter 11 cases, the U.S. Trustee is persuaded to appointmultiple creditors' committees.

Official creditors' committees have the right to employ legal andaccounting professionals and financial advisors, at the Debtors'expense. They may investigate the Debtors' business andfinancial affairs. Importantly, official committees serve asfiduciaries to the general population of creditors theyrepresent. Those committees will also attempt to negotiate theterms of a consensual Chapter 11 plan -- almost always subject tothe terms of strict confidentiality agreements with the Debtorsand other core parties-in-interest. If negotiations break down,the Committee may ask the Bankruptcy Court to replace managementwith an independent trustee. If the Committee concludes that thereorganization of the Debtors is impossible, the Committee willurge the Bankruptcy Court to convert the Chapter 11 cases to aliquidation proceeding.

Headquartered in West Sacramento, California, MTS, Inc., dba Tower Records -- http://www.towerrecords.com/-- is a retailer of music in the U.S., with nearly 100 company-owned music, book, and video stores. The Company and seven of its affiliates filed for chapter 11 protection on Aug. 20, 2006 (Bankr. D. Del. Case Nos. 06-10886 through 06-10893). Mark D. Collins, Esq., at Richards Layton & Finger, represents the Debtors. When the Debtors filed for protection from their creditors, they estimated assets and debts of more than $100 million.

The Company and its affiliates previously filed for chapter 11 protection on Feb. 9, 2004 (Bankr. D. Del. Lead Case No. 04-10394).

UNIVERSAL COMMS: Earns $1.4 Million in Quarter Ended June 30------------------------------------------------------------Universal Communications Systems, Inc., earned $1,499,535 of net income on 254,227 of revenue for the quarter ended June 30, 2006, compared to a $911,152 net loss for the same period in the prior year.

Net income in the current quarter includes a $946,794 gain on the write off of liabilities from discontinued operations of 2001 and a $1,375,742 gain on sale of property & equipment.

At June 30, 2006, the Company's balance sheet showed $2,491,637 in total assets and $4,045,767 in total liabilities, resulting in a stockholders' deficit of $1,554,130. The Company recorded a $2,452,598 stockholders' deficit at Sept. 30, 2005.

Universal Communications disclosed in its latest Form 10-Q filed with the Securities and Exchange Commission that its $21,640 cash position from continuing operations at June 30, 2006, is not sufficient to provide for working capital needs.

The Company says it will rely on private placements of common stock for short term funding needs. According to the Company, the recently completed private placement funding of $1,250,000, combined with anticipate sales of $2 million in Air Water products and $2 million in Solar Style products over the next twelve months would be sufficient to provide for its cash needs.

Prior to 2003, the Company was engaged in activities related toadvanced wireless communications, including the acquisition ofradio-frequency spectrum internationally. Currently, theCompany's activities related to advanced wireless communicationsare conducted solely through its investment in Digital Way, S.A.,a Peruvian communication company and former wholly ownedsubsidiary.

Going Concern Doubt

As reported in the Troubled Company Reporter on Jan. 19, 2006,Reuben E. Price & Co. expressed substantial doubt aboutUniversal's ability to continue as a going concern after itaudited the Company's financial statements for the fiscal yearsended Sept. 30, 2005 and 2004. The auditing firm pointed to theCompany's over $1.5 million working capital deficit and recurringlosses from operations.

URBAN HOTELS: Plan Confirmation Hearing Moved to August 30----------------------------------------------------------The U.S. Bankruptcy Court for the Central District of California moved the hearing to consider confirmation of Urban Hotels Inc.'s First Amended Plan of Reorganization to Aug. 30, 2006. The confirmation hearing was first scheduled for Aug. 9, 2006.

AN Capital is the sole objector to the Plan, despite recovering the principal amount of its loan to the Debtor. AN Capital wants the Debtor to also pay its $392,000 attorney's fees.

The Debtor plans to fund the Plan from the net proceeds of the $25.25-million sale of its hotel to EBUS, Inc. The $13.559 million net proceeds have been placed in escrow in an account at the City National Bank.

Administrative claims amounting to $221,000 will be paid on the Plan's effective date.

First Credit Bank holds on escrow a $10-million payment from the Debtor to satisfy its $10.515 million claim.

The Debtor is still disputing AN Capital's $4.345-million and Specialty Finance's $2.711-million claims.

The county of Los Angeles' $1.089-million property tax claim has already been paid.

Holders of unsecured non-priority claims totaling $1.558 million will be paid on the Plan's effective date.

The insiders' $1.882-million claim and Roshan Bhakta's $500,000 claim will be paid in full on the Plan's effective date.

A copy of the redlined Court-approved First Amended Disclosure Statement is available for a fee at:

USG CORP: Settling with Asbestos Property Damage Claimants----------------------------------------------------------USG Corp. reports in a regulatory filing with the U.S. Securities and Exchange Commission that they have reached agreements in principle to settle asbestos-related property damage claims.

USG's confirmed Plan of Reorganization does not create a trust for asbestos property damage claims. The Plan provides that disputed asbestos property damage claims timely filed in the bankruptcy proceeding will be resolved either in the Bankruptcy Court or other court, where appropriate.

If it is determined that any amounts are owed for asbestos property damage claims, the Plan provides that the Debtors will pay amounts in full, with interest where required. Any settled asbestos property damage claims will also be paid in full.

As a result of the bar date for filing asbestos property damage claims in Debtors' Chapter 11 proceedings,

Approximately 1,400 asbestos property damage claims were filed by the deadline for filing PD claims, and more than 70 PD claims were filed after the bar date. USG reports that more than 950 claims were disallowed or withdrawn, leaving approximately 520 claims pending.

USG says three PD claims remain unresolved.

With respect to the settled claims, USG says there can be no assurance that all agreements in principle will become final agreements.

In the second quarter of 2006, USG reversed $27,000,000 of a reserve for asbestos-related claims. This reversal was based on USG's evaluation of the asbestos property damage settlements it has reached in principle and the remaining unresolved asbestos property damage claims.

USG relates that the estimated cost of resolving the pending PD claims, including both the unresolved and the settled but unpaid claims, is reflected in its $876,000,000 accrued expenses at June 30, 2006.

About USG

Headquartered in Chicago, Illinois, USG Corporation --http://www.usg.com/-- through its subsidiaries, is a leading manufacturer and distributor of building materials producing awide range of products for use in new residential, newnonresidential and repair and remodel construction, as well asproducts used in certain industrial processes.

When the Debtors filed for protection from their creditors, theylisted $3,252,000,000 in assets and $2,739,000,000 in debts. TheDebtors emerged from bankruptcy protection on June 20, 2006. (USGBankruptcy News, Issue No. 119; Bankruptcy Creditors'Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000)

USG CORP: NYSE Delists Pref. Stock Rights & Berkshire Ups Stake---------------------------------------------------------------The New York Stock Exchange advises the U.S. Securities and Exchange Commission that it has removed from listing and registration the rights to purchase USG Corp. preferred stock, at the opening of business on August 21, 2006, pursuant to 17 CFR 240.12d2-2(a)(4).

NYSE Director Paras Madho explains that all rights pertaining to the entire class of preferred stock purchase rights were extinguished on July 1, 2006. The Rights expired and became null and void on July 1.

Trading of the preferred stock purchase rights was on July 3, 2006.

As reported in the Troubled Company Reporter on Aug. 4, 2006, the Company disclosed that 37.95 million rights were exercised in the company's recently concluded rights offering.

The company used a portion of the $1.8 billion gross proceeds from the rights offering and the Berkshire Hathaway backstop commitment to repay prepetition bank debt and senior notes, plus accrued interest, as contemplated in USG's Plan of Reorganization. Remaining proceeds, together with other available funds, will beused as required to make the balance of the payments contemplatedby USG's Plan of Reorganization and for general corporatepurposes.

Berkshire Raises Equity Stake

In a Form 4 filing with the U.S. Securities and Exchange Commission, Berkshire Hathaway Inc. reports that it now owns 15,569,092 shares, or 17.3%, of the Company's common stock.

From August 2 through August 9, 2006, Berkshire Hathaway's National Indemnity Company acquired 1,390,600 shares of USG Common Stock through open market purchases. On August 21, 2006, NICO acquired another 567,218 shares.

Berkshire Hathaway received 6.97 million shares of USG stock on August 2, 2006, as part of USG's rights offering and Berkshire's commitment to purchase all of the shares offered pursuant to the Rights Offering that were not issued pursuant to the exercise of rights.

Those shares, USG reported in a Form 10-Q filing, include 6.5 million shares underlying rights distributed to Berkshire Hathaway in connection with the shares it beneficially owned on the record date and 470,000 shares underlying rights distributed to other stockholders that were not exercised in the Rights Offering.

NICO is a wholly owned subsidiary of OBH Inc., which is a wholly owned subsidiary of Berkshire Hathaway.

Marc D. Hamburg, vice president of Berkshire, says the Shares were acquired using internally generated funds of NICO for $63,560,234 in the aggregate. No funds or consideration were borrowed or obtained for purposes of acquiring the Shares.

As of August 2, 2006, 89,849,117 shares of USG's common stock were outstanding.

About USG

Headquartered in Chicago, Illinois, USG Corporation --http://www.usg.com/-- through its subsidiaries, is a leading manufacturer and distributor of building materials producing awide range of products for use in new residential, newnonresidential and repair and remodel construction, as well asproducts used in certain industrial processes.

VARIG is currently flying 12 planes and a portion of its original routes, The Associated Press reports. VARIG currently operates flights in seven Brazilian cities -- Sao Paulo, Rio de Janeiro, Porto Alegre, Fortaleza, Salvador, Recife and Manaus -- and in Frankfurt, Germany; Buenos Aires, Argentina; Miami and New York, in the U.S.

VARIG plans to expand its fleet to 45 planes by the end of the year and up to 75 aircraft by 2008.

VARIG announced late in July that it would lay off 5,500 employees -- about 60% of its workforce in Brazil -- as part of its judicial recovery plan. The airline said it would gradually rehire the dismissed workers once it resumes growth.

About VARIG

Headquartered in Rio de Janeiro, Brazil, VARIG S.A. is Brazil'slargest air carrier and the largest air carrier in Latin America.VARIG's principal business is the transportation of passengers andcargo by air on domestic routes within Brazil and on internationalroutes between Brazil and North and South America, Europe andAsia. VARIG carries approximately 13 million passengers annuallyand employs approximately 11,456 full-time employees, of whichapproximately 133 are employed in the United States.

The Company, along with two affiliates, filed for a judicialreorganization proceeding under the New Bankruptcy andRestructuring Law of Brazil on June 17, 2005, due to a competitivelandscape, high fuel costs, cash flow deficit, and high operatingleverage. The Debtors may be the first case under the new law,which took effect on June 9, 2005. Similar to a chapter 11debtor-in-possession under the U.S. Bankruptcy Code, the Debtorsremain in possession and control of their estate pending theJudicial Reorganization. Sergio Bermudes, Esq., at Escritorio deAdvocacia Sergio Bermudes, represents the carrier in Brazil.

ILFC relates in a regulatory filing with the U.S. Securities and Exchange Commission that if VARIG returns the aircraft, ILFC will be required to remarket those aircraft and may incur costs related to re-leasing those aircraft.

"VARIG is still operating but is not currently meeting all rental obligations under the leases," Alan H. Lund, ILFC director, vice chairman, chief financial officer and chief accounting officer, says.

ILFC has asked the U.S. Bankruptcy Court for the Southern District of New York to enforce a stipulation it signed with VARIG to keep the airline current on the leases or return the aircraft.

ILFC recorded $13,100,000 in revenues from rentals of flight equipment for the quarter ended March 31, 2006, from VARIG.

Mr. Lund reports that ILFC took an $8,800,000 charge in the first quarter of 2006 related to receivables of restructured rents from VARIG. In 2005, ILFC took a $6,700,000 charge related to receivables from VARIG.

About VARIG

Headquartered in Rio de Janeiro, Brazil, VARIG S.A. is Brazil'slargest air carrier and the largest air carrier in Latin America.VARIG's principal business is the transportation of passengers andcargo by air on domestic routes within Brazil and on internationalroutes between Brazil and North and South America, Europe andAsia. VARIG carries approximately 13 million passengers annuallyand employs approximately 11,456 full-time employees, of whichapproximately 133 are employed in the United States.

The Company, along with two affiliates, filed for a judicialreorganization proceeding under the New Bankruptcy andRestructuring Law of Brazil on June 17, 2005, due to a competitivelandscape, high fuel costs, cash flow deficit, and high operatingleverage. The Debtors may be the first case under the new law,which took effect on June 9, 2005. Similar to a chapter 11debtor-in-possession under the U.S. Bankruptcy Code, the Debtorsremain in possession and control of their estate pending theJudicial Reorganization. Sergio Bermudes, Esq., at Escritorio deAdvocacia Sergio Bermudes, represents the carrier in Brazil.

By rejecting the Leases, Gaines expects to reduce postpetition administrative costs. According to Gaines, the Leases are costly to maintain and unnecessary to its operations and business. Gaines tells the Court that it has reviewed each of the Leases and has determined that those Leases do not have any net value to its estate.

About Vesta Insurance

Headquartered in Birmingham, Alabama, Vesta Insurance Group, Inc.(Other OTC: VTAI.PK) -- http://www.vesta.com/-- is a holding company for a group of insurance companies that primarily offerproperty insurance in targeted states.

J. Gordon Gaines, Inc., is a Vesta Insurance-owned unit that manages the company's numerous insurance subsidiaries and employs the headquarters workers. The Company filed for chapter 11 protection on Aug. 7, 2006 (Bankr. N.D. Ala. Case No. 06-02808). Eric W. Anderson, Esq., at Parker Hudson Rainer & Dobbs, LLP, represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets between $1 million and $10 million and debts between $10 million and $50 million.

VESTA INSURANCE: Wants to Transfer Accounts to Texas Commissioner-----------------------------------------------------------------Debtor J. Gordon Gaines Inc. asks the U.S. Bankruptcy Court for the Northern District of Alabama for authority to transfer claims accounts to the Texas Commissioner of Insurance and authorize the Texas Commissioner to continue to use the claims accounts for a reasonable period of time pending the transfer for purpose of processing the payment of insurance claims, which have been submitted and approved for payment prior to the Debtor's bankruptcy filing.

Before Gaines Inc. filed for bankruptcy, as part of the administrative services the Debtor provides to Vesta Insurance Group, the Debtor maintained accounts into which funds were deposited for the payment of insurance claims approved for payment by the insurance subsidiaries of Vesta Fire Insurance Corporation. At the direction of the insurance subsidiaries, Gaines disbursed funds from the Claims Accounts to the insureds on their insurance claims:

The Texas Commissioner continued to use the Claims Accounts for the deposit and disbursement of funds and payment of insurance claims prior to August 7, 2006.

The operating guidelines established by the Bankruptcy Administrator for the Northern District of Alabama for debtors-in-possession requires the establishment of an entirely new mechanism for the payment of these insurance claims.

However, Rufus T. Dorsey, IV, Esq., at Parker, Hudson, Rainer & Dobbs, LLP, in Atlanta, Georgia, complains that it will be expensive and time-consuming, and may delay payment of these insurance claims to the detriment of the insureds.

None of the funds deposited in the Claims Accounts and disbursed to insurance claimants are property of the Debtor or its estate, Mr. Dorsey points out.

About Vesta Insurance

Headquartered in Birmingham, Alabama, Vesta Insurance Group, Inc.(Other OTC: VTAI.PK) -- http://www.vesta.com/-- is a holding company for a group of insurance companies that primarily offerproperty insurance in targeted states.

J. Gordon Gaines, Inc., is a Vesta Insurance-owned unit that manages the company's numerous insurance subsidiaries and employs the headquarters workers. The Company filed for chapter 11 protection on Aug. 7, 2006 (Bankr. N.D. Ala. Case No. 06-02808). Eric W. Anderson, Esq., at Parker Hudson Rainer & Dobbs, LLP, represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it estimated assets between $1 million and $10 million and debts between $10 million and $50 million.

WEST VIRGINIA: Section 341(a) Meeting Set for September 19----------------------------------------------------------The U.S. Trustee of Region 4 will convene a meeting of WestVirginia Consumers for Justice's creditors at 10:00 a.m., onSept. 19, 2006, in Room 2009, Robert C. Byrd Courthouse at300 Virginia Street East in Charleston, West Virgina.

This is the first meeting of creditors required underSeciton 341(a) of the Bankruptcy Code in all bankruptcy cases.

All creditors are invited, but not required, to attend. ThisMeeting of Creditors offers the one opportunity in a bankruptcyproceeding for creditors to question a responsible officer of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors.

Headquartered in Charleston, West Virginia, West Virginia Consumers for Justice files its chapter 11 protection on Aug. 10, 2006 (Bankr. S.D. W. Va. Case No 06-20478). JosephW. Caldwell, Esq., at Caldwell & Riffee represents the Debtorin its restructuring efforts. West Virginia estimated itsassets at $1,534 debts at $300,062,129 when it filed forprotection from its creditors.

WINN-DIXIE: Wants Court to Approve Brookshire Grocery Stipulation-----------------------------------------------------------------Winn-Dixie Stores, Inc., and its debtor-affiliates and Brookshire Grocery Company ask the U.S. Bankruptcy Court for the Middle District of Florida to approve their stipulation.

Winn-Dixie Stores, Inc., and its debtor-affiliates and Brookshire Grocery Company are parties to a lease for Store No. 2435. A July 13, 2006, Court order authorized the Debtors to reject the Lease.

D.J. Baker, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, in New York, relates that the Debtors and Brookshire have resolved the allowance and treatment of the claims under the proposed Joint Plan of Reorganization. The parties agree that:

(1) the Winn-Dixie Stores Claim will be allowed as a Class 13 Landlord Claim for $456,100;

(2) upon the effective of the Plan incorporating the substantive consolidation compromise, the Winn-Dixie Montgomery Claim will be deemed disallowed and expunged without need for further Court order; and

(3) if the Plan is not confirmed or the effective date does not occur, the two claims will not be disallowed, expunged or otherwise prejudiced.

WINN-DIXIE: Wants to Reject Store No. 1059's Lease as of Aug. 31----------------------------------------------------------------Winn-Dixie Stores, Inc., and its debtor-affiliates seek authority from the U.S. Bankruptcy Court for the Middle District of Florida to reject the Store No. 1059 Lease as of Aug. 31, 2006. They also ask the Court to set a bar date for Windward to file any rejection damage claim arising in connection with the Lease.

Winn-Dixie Stores, Inc., and Windward Partners IV, LP, are parties to a lease dated July 29, 1994, for the Debtors' Store No. 1059 located in Taylors, South Carolina. Pursuant to the Lease, Winn-Dixie pays Windward $422,000 in rent each year.

In August 2003, Winn-Dixie subleased the Premises to Pro-Fit Management, Inc. Under the Sublease, Pro-Fit is required to pay Winn-Dixie monthly rent at graduated rates between $100,000 and $250,000 a year.

After Winn-Dixie's bankruptcy filing, Pro-Fit failed to pay the rent so Winn-Dixie terminated the Sublease effective August 8, 2006. However, Pro-Fit remains in possession of the Premises.

According to Cynthia C. Jackson, Esq., at Smith Hulsey & Busey, in Jacksonville, Florida, the Debtors no longer need the store and that even when paid by Pro-Fit, the rent is not sufficient to cover the payments due under the Lease. Rejection of the Lease will save the Debtors approximately $422,000 a year.

WORLD HEART: Posts $3.9 Million Net Loss in Second Quarter of 2006------------------------------------------------------------------World Heart Corp. filed its second quarter financial statements for the three months ended June 30, 2006, with the Securities and Exchange Commission on Aug. 11, 2006.

Revenues for the second quarter ended June 30, 2006, were $3 million, an increase of 22%, compared with revenues of $2.4 million reported in the second quarter ended June 30, 2005. For the first six months of 2006, revenues were $6.3 million, an increase of 7%, compared with revenues of $5.9 million for the first six months of 2005.

The net loss for the 2006 second quarter was $3.9 million compared with a net loss of $4.6 million in the prior year's second quarter. The net loss for the six-month period ended June 30, 2006, was $7.3 million compared with $8.6 million for the six-month period ended June 30, 2005.

WorldHeart's cash and cash equivalents were $4.6 million at June 30, 2006, a decrease of $2.7 million from March 31, 2006, and a decrease of $6.1 million from Dec. 31, 2005. During the first half of 2006, cash usage from operating activities was $6.0 million. This represents a reduction of approximately $1.4 million per quarter from average levels of cash usage in the last two quarters of 2005.

The Company continues to aggressively explore, with the assistance of investment banking advisors, all financing and strategic alternatives, including equity financing or a possible sale of the Company. The Company is taking steps to conserve cash pending a definitive outcome of these activities. These measures include reducing raw material purchases and manufacturing activities to better align inventories with current commercial shipments and curtailing discretionary spending.

For the three months ended June 30, 2006, gross margin as a percent of revenue was 36%, compared with 13% for the three months ended June 30, 2005. For the six months ended June 30, 2006, gross margin as a percent of revenue was 47%, compared with 27% for the six months ended June 30, 2005.

Significantly lower cost of goods sold during this year's three and six month periods was due principally to more favorable manufacturing variances when compared with the same periods last year. In addition, there was a higher margin other-product revenue mix this year.

Selling, general, and administrative expenses for the three months ended June 30, 2006, were $2.3 million, a decrease of $700,000, or 25%, from the same period in 2005. For the six months ended June 30, 2006, selling, general, and administrative expenses were $4.7 million, a decrease of $1.7 million, or 27%, from the six months ended June 30, 2005. These decreases were due to reduced selling and administrative costs, including savings realized from the consolidation of North American Novacor operations completed in June 2005.

Research and development expenses for the three months ended June 30, 2006, were $2.8 million, an increase of $1.5 million, compared with the three months ended June 30, 2005. Research and development expenses for the six months ended June 30, 2006, were $5.7 million, an increase of $3.2 million, compared with the same period last year. These increases were primarily due to the MedQuest acquisition in July 2005 and the related development costs of the WorldHeart Rotary ventricular assist device.

At June 30, 2006, the Company's balance sheet showed $18.687 million in total assets, $5.221 million in total liabilities, and $13.465 million in shareholders' equity.

As reported in the Troubled Company Reporter on May 12, 2006,PricewaterhouseCoopers LLP, World Heart Corporation's auditor,expressed substantial doubt about the Company's ability tocontinue as a going concern after auditing the Company's financialstatements for the year ending Dec. 31, 2005. PwC pointed to theCompany's recurring losses.

Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities.Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report.

Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test.

A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com/

On Thursdays, the TCR delivers a list of recently filed chapter 11 cases involving less than $1,000,000 in assets and liabilities delivered to nation's bankruptcy courts. The list includes links to freely downloadable images of these small-dollar petitions in Acrobat PDF format.

Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today.

Monthly Operating Reports are summarized in every Saturday edition of the TCR.

For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852.

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